Marketing and Distribution of New Food Supplement Products in the East European Market. A Business Plan

How Food Supplements are Part of Our Daily Life and May Harm Us

Master's Thesis, 2012

105 Pages, Grade: 2



1 Business Plan
1.1 Background of food supplements, plant food supplements or phytopharmaca
1.2 Structure of the work

2 Marketing in Pharma Business
2.1 Pharma Marketing in general
2.2 Marketing Plan
2.3 Market Share
2.4 Market Segments
2.5 Market Analysis
2.6 Portfolio Analysis
2.7 Market Brand
2.7.1 Brand Models
2.8 Market Goals
2.9 Marketing Strategy
2.9.1 Tenders, Offers, Characters of Supplies
2.9.2 Pricing and Strategy
2.9.3 Distribution channels
2.9.4 Marketing Tracking and Controlling

3 Trends in the pharmaceutical industry
3.1 Impacts of Food Supplements on this trend
3.2 How bioactive foods affect obesity
3.3 New Regulations regarding Food Supplements
3.3.1 Pharmaceutical product
3.3.2 Food and Food Supplements
3.3.3 Dietary Products
3.3.4 Dietary Products for medical use
3.3.5 Cosmetics
3.3.6 Medical Products:

4 Marketing Tools for Food Supplements
4.1 Marketing Mix
4.2 Product manager and Product management
4.3 Strategic Planning
4.3.1 Positioning
4.3.2 Orientation
4.4 Operational Planning
4.4.1 Competences and setup of the marketing team
4.4.2 Cooperation and one-stop-shop for the medical department
4.4.3 Cooperation with the practitioners and pharmacies

5 Advertising
5.1 The sales-team and pharmaceutical representative
5.2 Advertising within the pharmaceutical legal framework
5.3 Ethic Assets

6 Funding and Finance
6.1 Early Stage Phase
6.2 Expansion Phase:
6.3 Late Stage Phase
6.4 Funds, Grants and Venture Capital

7 Business Model for Food Supplements
7.1 ‘State of the Art’ Food Supplements in Europe
7.1.1 Food supplements
7.1.2 Plant Food Supplements (bioactive Compounds) and Phytopharmaca
7.1.3 Novel Food
7.1.4 Functional Food
7.2 Define Business opportunities, market opportunities
7.2.1 Definition within distribution channels, partner systems, POS, and other
7.2.2 Rank potential
7.3 Market Potential Food Supplements vs. traditional prescription medicine (RX)
7.4 Trends in the future – Next Generation Food Supplements
7.5 Challenges for new food supplements
7.6 USP
7.6.1 Characteristics for food supplements and phytopharmaca
7.6.2 East Europe and Russia and its market potential
7.7 Financial Model, Business Plan
7.7.1 Funding Structure:
7.7.2 Cost table
7.7.3 Operational Planning and Scheduling

8 Intellectual Property and Development

9 Attachments

10 Figures and Tables

11 Literature

1 Business Plan

Concept for new products of Food Supplements for Marketing & Distribution in the East European Market.

The Food Supplements Market has grown in the last decade significantly and is nowadays a well known part of the health industry.

The current profile of the company is a state of the art natural products selling company with a sound level of market share on the Austrian food supplement market. A distinct product portfolio over the last 15 year has been developed and made the company a well-known player for qualitative food supplements products.

Iterative activities for building growth have finally led to the situation of thinking about the so called next generation of food supplements, and the possible influence on the current customer profile and market distribution levels.

1.1 Background of food supplements, plant food supplements or phytopharmaca

A major influence in the use of food supplements is the fact that it is as part of our daily life and harms our physical and physiological behavior and mentality through food and dietary nutrition. Facing the fact, that nutrition is part of our life style and influences our well-being, the systematic way to keep the high level of well-being is directly linked to nutrition and they way we follow it every day. Nutrition as part of our well-being is also influenced by our behavior, how we take care of our daily consumptions of foods and its ingredients. As everybody knows since childhood, food has major impact on ones physical development and mental healthiness. We have learnt that additional food ingredients can influence our well-being. Therefore the more we get aware of the influence, the more we care about our food and supplements to stay healthy and more or less emphasize the salutogenetic approach of medical treatment[1]. As ANTONOVSKY claims in his approach, people with ability for self-medication, they will have the ability to do everything to stay healthy and adequately live their life in such mode, that they will continue to stay healthy. This will be done with balancing their life in matters of daily work, stress factors, infections, social integration, self-confidence and many more. As BENGEL [2] discusses in his symptomatic approach, the question of being healthy is more the question of preventive medicine in respect of activating ones resistance against health influencing factors.

This fact is more or less the initial point of medication outside of the classical prescription medicine, in its pathogenic manner. Self-medication is a trendy thing and is part of a high quality standard of living, which gains more influence also in the social structure of people. To be healthy means high quality of living and following the trend will indicate the willingness to keep that quality on the high standard. Therefore, as a part of peoples lifestyle, they spend money for health, more as they would do without the influence of the know-how, that self-medication can offer. Healthiness in a salutogenic manner is definitely part of the high quality lifestyle of modern and high-civilized people.

1.2 Structure of the work

This work will draft a business model in a very complex framework of a newly adapted legal structure in the health care business of food supplements and bioactive substances of phytopharmaca.

In respect of the complex situation of the business models in pharmaceutical areas, this work will try to compile the key elements of a business plan required to be worked out in detail, depending on the vertical integration of the business characteristics on the current market situation. A general approach to the basic elements of a business plan will be elaborated and follow the essentials of a business plan concept, as there are:

Business Plan key structure[3]:

Formulate value proposition, i.e. the value delivered to the customer by the product based on specific technology.

Identify market segment, i.e. users to whom the technology brings value and performs the job to be done.

Define structure of the value chain, required for the product creation and distribution. Value creation is necessary, however not sufficient condition of profitability; value creation is conditioned by:

balance of forces among our business, suppliers and competitors

presence of complementary assets (e.g. in production, distribution, etc.) necessary for supporting the company position in the value chain.

Specify the mechanism of profit creation and evaluate product cost structure and target margin

Describe the company position in the value network that connects suppliers and customers, including identification of potential alternative producers and competitors.

Formulate competitive strategy enabling to the innovative company to gain and keep competitive advantage.


In the first sections a comprehensive summary of the market share of pharmaceutical products in Central Europe and Eastern Europe in theory and as a general description will give an overview of the market situation. This will be covered by the following section:

Pharma Marketing in General

Marketing Plan

Distribution Channels

Marketing Tools for food supplements

Define Business Opportunities

Branding, Logistics



Organizational Requirements

The section will give an overview of the current market share conditions of food supplements.


The Business Model and the definition of the Unique Selling Proposition. The comprehensive approach to the strength of such products on the market and its unique position will be explained within the main sections.

State of the art FS

State of the art PFS

State of the art phytopharmaca

Market Potential of FS and PFS vs. RX


The Product mix and the key strategy to answer the question: “how to enter the market”. This will be done using the example for an upcoming market, like TCM (Traditional Chinese Medicine) and related products.



Easter Europe and Russia Market Potential


A closer look at the product launch and related project initiatives will describe the development planning and the concept. Various initiatives should show the possibilities for a future marketing structure.

Project Plan (Milestones)

Financial Model


Finally, a Summary of the business plan will be developed. This will include a finance model based on the funding structure of the “7.FP” (CORDIS 7. Frameworkprogram) of the EU, conducted within the framework of the FFG (Forschungsförderungsgesellschaft) in Austria.

Intellectual Property and Development

2 Marketing in Pharma Business

2.1 Pharma Marketing in general

As in other industries, also in the pharmaceutical industry, marketing is a main part of the business model. The basic driver of the business is based on turn over of pharmaceutical products, and only some of them can compete as a kind of Non-Profit-Organization. Based on this fact, the goal for the business plan and the strategy is to generate profit and value, and therefore marketing as a main part of the business plan.

Even this industry needs marketing to sell their products, compared with other industries, pharmaceutical products are not the same. Take the example you want to sell cars. You can generate a marketing concept to sell more and more cars than others, because there is no limitation for the customer to have a least one car. In the pharmaceutical industry the principle is different. There is a kind of limitation. The limitation is based on the concept, that you cannot make advertisements for diseases and medications as much as you want. In other words and in a very simple approach, advertisement per se generates a bigger demand, in this case the demand would be defined by people with more diseases. And generating a mankind with more and more diseases would be an ethical problem.

On the other side, marketing should be designed to help practitioners and patients to have the right medication to ease ones disease. So information about the medical product how to find the right medication, that generates profit, is the only way to allow pharmaceutical industry to make marketing for. The methodology of the definition of pharmaceutical marketing plan can also be described as a way to “find the solution, but never call it by name”. More details of how this challenge influences the structure and the outcome of marketing plans of pharmaceutical companies is analyzed and described in the following sections.

2.2 Marketing Plan

The marketing plan should help to coordinate the different activities that are required for effective marketing. Therefore the structure can be designed to mainly concentrate on a product or a product family, in different sectors or regions, or segments. The facts of the marketing plan are then based on the market analysis and rules, how marketing can be managed by the productmanagement of the company.

To setup a marketing plan, several topics must be considered. A specific know-how of the product in its market has to be available. This can be derived by the

Market potential: This means the total market of the product possible

Market volume: The current volume of the market for the products

Sales potential: The current sales possibility for the company

Sales volume: The actual sales of the products in its market by the company.

Therefore the marketing plan is a structured way to reach the customer, based on the market analysis for the products. The main goal of the marketing plan is the aim to reach knowledge of the own market.

Main Goals of the marketing plan[4]:

To start with knowledge of the market, first the analysis of the market must be done. This is required for the next step, the analysis of the own position in the market. The analysis of the “As-Is” Situation of the market is the main requirement for future economic activities and profitability calculation.

The As-Is Analysis is essential to find the relation to the other competitors, and it shows the strength and weakness of the own products. Once this is done, an activity list to make the next steps can be created. This will include a detailed analysis of the position in the market and will identify the service requirements and product capabilities in relation to similar competitor products. During this analysis, an evaluation of chances and risks of the own products in relation to the potential of others have to be assessed in the way, that a small service range or product specification range can be defined, but is not small enough to push own products out of the market. Especially pharmaceutical products have intentionally a specific therapeutic area, in which it can proof its full potential and treatment capabilities. But in addition to that originally therapeutic indication, pharmaceuticals have also a second or third major indication where it can be used for (e.g. Vitamin C in different therapeutic classes).

Finally the potentials of the own products are defined and the geographical location needs to be considered. This will be coordinated closely with the product mix and the customer segments. As a result of this combination, the market volume against the total market can be evaluated. This defines the market share and the stake of the possible market opportunities. Related to the competitors, the potential to increase the market share and take a bigger steak of the competitors is the next step, which will force the products to be evaluated further in the different market segments and therapeutic areas.

2.3 Market Share

For the pharmaceuticals, the market share depends on the different products classes, as they are defined in therapeutic areas. For each therapeutic class, the market potential can be analyzed separately. There are 4 steps to reach the sales volume per product. This includes the current market volume, the ongoing developments of that therapeutic class, the growth and the profitability. Within this market potential, the product will reach a specific market volume. But to exploit the market volume and to eliminate shares of the competitors, the market potential of the product is defining the difference between “stars” and “poor dogs” and has do be developed. This can be done with some tools, to create and define market segments.

2.4 Market Segments

For the pharmaceutical industry, products can be divided in several Classes. These classes are structured via the ATC-Codes, that indicates the region of disease, the product is used for.

The classes are defined by the EphMRA[5], the European Pharmaceutical Marketing Research Association. The ATC Code system is simply a classification of therapeutically usage or indication. Therefore it is easy to group all the main pharmaceutical products for specific patients and diseases. Some of those indications are typical for a patient group of older people, others for younger or grown-ups. In general, there is also a demographic impact on the classification and the combination of them. People also have trends to develop their own sociodemographic behavior regarding drugs and pharmaceuticals. Some are specific for rich or poor people, and they depend on their mental or physical attitude to the proposed medication. So to say, for older people it’s ridiculous to think about salutogenic medicines, instead of young people they should focus on salutogenic medicine, because they do not need intensive medical care patients with higher age.

For marketing reasons the first answer to get is the customer and its behavior regarding its disease. But not only the patient as a customer is necessary to be target, also the distributor as the practitioners are necessary. They must be able to act between the pharmaceutical companies and the patient as a median, and must translate the requirements of the patient to the applicability of the pharmaceutical product. This channeling of requirements can only be done with sufficient knowledge of the product. Therefore the segment of the practitioner is a total different one as the segment for the patient as a customer. The one is more discipline oriented while the other one is more consumer oriented. Both segments have their own rules of marketing behavior and must be split from each other.

The marketing segments have different characteristics, but must be measureable and traceable. Otherwise no value can be generated to improve the business based on the channel segments. The characteristics must be stable of a specific time period to deliver valuable information back to the marketing team.

The most important marketing segments are:

1) Sociodemographic Criterias:

This factor will depend on the age, sex, employment, salary.

2) Geographical Criteria:

Urban or non developed public areas.

3) Psycho-graphical Criteria:

The general personal behavior is part of awareness for risks or lifestyle. The motivation for the product can be different. There is a special imagination of usage of the product, as well as a personal fit to one’s lifestyle.

4) Behavioral Criteria:

Attraction can be made by some advertisement through offerings and promotion, and everyone can react in different ways. There are several communication channels, which have individual impact on each of us, and cannot be generalized. The way the practitioner or the pharmaceutical advise takes place, the way we act and react depending on our intellectual and cultural style.

All in once the distributors and key players will have to answer the question, which customers are in which geographical segment, subdivided in sociodemagraphic zones. Each pharmacist and practitioner will generate special demands and frequent orders. Having an overview of these demands in a structured way, the customers will be divided into Class-A, Class-B and Class-C customers, which are quite simplified through their market volume and order reliability. A-Class customers do not need additional promotion, more the Class-B customers, they probably could move up to Class-A customer and need more professional care than Class-A. Class-C customers just create some sales volumes, but not significant enough to be seen as a Class-B customer. Maybe these customers will never develop to upgrade, depending on their potential to grow.

To gather all those information in a structured way, marketing experts use databases to store and analyze relevant information about customer behaviors, regions, segments and sales volumes, to be able to develop specific profiles for their products. Therefore, the people form the field service can be monitored, informed and controlled. The feedback from those experts will generate in turn a valuable information platform to maintain, develop and train products and customers.

2.5 Market Analysis

To setup up this information, a typical data gathering process has to be started. Information sources can be the customer itself, or different sources like:


These could be pharmacies, logistic offices, warehouses and health centers.

Logistic Services:

Those services provide high level information about sales volumes per region, also on a product segment basis. Since the product must be tracked (GMP-Guideline for pharmaceutical products[6] ) over all its locations, a complete track of product sales is available and can be use for marketing analysis.


Not only sales information is available at the POS (Point of Sales) at the office of the practitioners is available, also information about treatment and patients compliance with the prescribed medicine. Therefore, information has to be filtered as required for the product, in respect of other prescription for different diseases; the same product can be used for (Off-Label-Use)

- Pressure Groups:

This could be insurance companies, practitioners representatives and groups, NPOs for specific therapeutic classes funded by some pharmaceutical partners


They play a major in the way how marketing is designed and conducted. The competitor has to be analyzed regarding market position, market share, pros and cons of the company, the future development of the next products and its pipeline, distribution channels, and so on.


Technology is one of the main parts in marketing design and strategy. It supports and generates the future development of the product pipeline and the future assets of the company, as far as technology has directly combined with IPR (Intellectual property rights) or licenses.

All information collected by those sources will be analyzed according its traceability and incidence according future trends. Therefore a best guess scenario will be created with help of specific marketing drivers to create scenarios for the future, which can be integrated in the strategic business plan of the pharmaceutical company.

Relative Market Analysis, SWOT:

To show up the relative marketing position of the company a value analysis of the strength of the company, the weak points of the categories or specific products, but also the opportunities of the company in the market and the possible threats. The focus of the analysis of strength and weakness is more an analysis of internal process and structures. The opportunities and threats have their focus on the market and the competitors. In summary it is an important to tool to have baseline for future company strategies or also for products. Having this analysis finished, it will be up to the management to move the company in the direction of new strategic approach, being aware of the fact that getting rid of old bad habits is more difficult than taking advantage of the own strength.

Focusing on the SWOT-Analysis of products, the strength and weakness of the own products must be done compared with the competitor and on product level. There are some relevant factors define the level of analysis:

- Success factor for the customer:

What are the relevant factors for the customer? These factors are the product efficiency, the costs, biocompatibility and durability. Those factors directly influence the product image and reflect to company’s image in the same way. Especially for the customer, all side effects and adverse effects will influence the satisfaction of the customer.

- Success factor for the sales volume:

The suppliers, e.g. practitioners or pharmacies, influence those factors, how the product will be placed on the market by their means. They will influence the market during their daily work with the products and their behavior for subscription and medical treatment. Their recommendations regarding the applicability of the product, treliability, availability, additional services for the customer, a.s.o. will influence sales of the product.

- Success factor of product relevant resources and capabilities:

The capabilities of the marketing team are relevant to the power and the ability to penetrate the market. The support of the development team is also important to support the marketing team with relevant stakeholder information, like practitioners or opinion leaders do. The power of this team must be sufficient to deliver all relevant and up to date information for the marketing team, e.g. on conventions or conferences for special diseases, the product is developed for. The support of the production team can also influence the reliability into the product regarding quality, availability, innovation and costs. A sound mix of this team will be necessary for successful marketing.

Depending on the SWOT Analysis (see section SWOT Analysis:, page 42), the product itself needs to be defined in its lifecycle phase. The Life cycle phases of a product can be divided in several phases:

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To characterize a product, all phases during the product lifetime will be monitored an tracked. According those phases, product changes and extensions can be analyzed, developed and implemented in individual steps between. These steps can be done for products itself, product families or categories. Together, all products under the cover of the product life cycle can be used as an indicator for innovation and ability of growth for the company. Closely linked with the product portfolio and it market situation, the financial aspects for long term strategic activities will be triggered by the product life cycles.

Especially pharmaceuticals have several stages in their life cycle. Products that have reached their maturity peak, can be relaunched with different aspects of treatment and prescription patterns. This will usually be based on monitoring product effects during the growth phase. Mostly feedback from practitioners or studies within medical centers set the baseline for new treatment options or therapeutic classes.

Products that enter the growth phase and derived from a product group of similar therapeutically classes will have to show their potential on the market. This moment is critical for a new product and will control the future activities of the company regarding marketing and finance.

During the product lifecycle, several stages have to be managed and optimized regarding the product capabilities. Not only the marketing plan, also the company’s organization must be flexible enough to compete with all stages of their products during the lifecycle process.

As Robert S. Kaplan und David P. Norton[7] defined the Balanced Scorecard Model 1992 on the Havard University, A company must have several key-competences to be able to grow with their products and keep their innovation on a current level.

An overview of the different aspects how to qualify products on the market as a graphical integration:

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Table 1: Product Lifecycle

As a predecessor to the market entry, the product must be developed and designed, to allow market entry. These steps need to be addressed as the Development Phase of the products, not included in this overview.

To sum up the Product Development phases, this Overview of “Clinical Trials”[8] show up the main key aspects and phases:

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Table 2: Clinical Trials

The reason behind the big gap between Phase I and products that reach market authorization is mainly influenced by the fact, that current invention and technologies do not provide as many new chemical entities as required for the pharmaceutical companies, to have a well defined product pipeline with many products under different stages in the development. Therefore the chance to develop a blockbuster-product is limited and the necessity for the companies to fill up their portfolio with products from licensing in different development stages is very high and competitive.

2.6 Portfolio Analysis

Starting the portfolio analysis is more or less the work to find the ideal composition of the current products for the market. The portfolio analysis must fit to the overall strategic goal of the concept and must be an integrated part of the development strategy.

Portfolio Analysis can be started with one of the tree main tools, as summarized below:

The BCG-Matrix for internal product analysis.

The Marketing-Mix and the 4 P’s

The Product-Market Mix of Ansoff[9]

1) The BCG- Matrix is based on the two dimensional model. The first segment is the market growth; the second segment the market share, the so-called “Growth-Share-Matrix”.

Growth can be so compiled with data from research institutes and statistics. These data is available in different types of detailed levels. According which level to choose, the appropriate data must be structured and adapted for the matrix.

The share part of the matrix defined as the relative market share can be split up in four fields:

Cash Cows:

This filed defines product that have a significant market share and a low growth rate. The profit is quite high, but the maximum market share has been reached and additional growth is not expected. The cash flow generated by the cash cows will be use to develop a question mark or a star. The rest of the investments will be used for the cash cows themselves.

Poor Dogs:

This flied is quite underdeveloped or simply poor in their performance. It is still open if products of this filed will develop to cash cows or stars. These products have a very low market share and gain a small market segment. Mostly such products are those that have reached the end of their life cycle and needs to be disinvested.

Question Marks:

These products have a big market potential but currently no significant market share. The future growth is not clear defined or predictable. New products just launched have this qualification and the stability on the market is not good enough. To develop those products to stars, additional investments have to be taken to expand the market share to significant growth.


The stars are market leader in their segments. So the company has to invest a lot to keep these products on top sales in the market segments. This means also, that during the phase of high sales, the product has to earn the big steak of the market and will be able to support other products of the pipeline that are not cows or stars at the moment. During the lifetime of the stars, the products will start to loose their position as stars and can still be on the market gaining enough profit for the company acting as cash-cow and support new products to grow and increase the sales volumes to generate stars again.

The challenge within this matrix is the differentiation between the 4 sections. It is often difficult to tell which limits have to be use to judge the right value for the right section. Also the 2 parameters ‘Market Share’ and ‘Relative Market Growth’ are simplifying too much. Therefore an extension to this 4-Section matrix is the 9 Section-Matrix, which includes sections like ‘Market Attractivity’ or ‘Market Advantages’.

2) The Marketing-Mix and the 4 P’s are the essential tools for sales planning and market development. The 4 P’s are the main marketing tools for the company and they are described in Product, Price, Place and Promotion. In this marketing mix the four elements of a company to control their sales volumes include the strategic components like ‘Product policy’, ‘Distribution policy’, ‘Price policy’ and ‘Communication policy’. The secret behind successful marketing is the right combination of those components, to influence the market effectively.

The Product Mix:

It is also called the heart of the marketing. It includes the activities around the product quality, the continuity of the product performance as well as additional services applicable for the product. A possible instrument to design the product mix could be:

Productdesign, naming of products, packaging, productvariations, customer service and warranty options.

The Price Mix:

The price mix can be modified in accordance with the requirements of the potential customer. These customers should be attracted by price reductions in different ways. These can be price discounts, supply conditions, packages or bundles.

In some ways it is possible for pharmaceuticals to have some price variations, but mostly legal requirements prohibit those customer-influencing possibilities.

The Place Mix:

The products must be placed at the right time and location. The way how the acquisitioned distribution is organized and managed is important for the place mix. In accordance with the acquisitioned distribution, the logistic where and when to store products has to be aligned with the customer’s interests. In combination of all aspects, there are several policies to be considered: trading policy, location policy, marketing logistic policy, distribution channels policy.

The Promotion Mix:

The product mix is responsible for the offers and the positive image of the products. The advertisements and marketing promotions define the individual asset of the products to the customer. The instruments are marketing, promotion and public relation.

Promotion has some key aspects like customer target groups. Depending on the specific target group, marketing and promotion have not the same influence.

Marketing is simply the influence of potential customers to fulfill marketing goals. Promotion is support for all key players in the process of distribution, like support for the distributor, the sales person, the local agent etc.

3) The Product Market Mix:

Ansoff9 previously developed this combination of product and marketing. This matrix can tell what opportunities can be reached in combination of four strategic fields, and may be seen as a logical development of the BCG matrix and its weak points.

a) Market-Penetration
b) Market-Development
c) Product-Development
d) Product-Diversification

a) The “market penetration” follows the principle to penetrate the market with the current products and portfolio. The goal is to increase the market share and exploit the power of the market potential. This goal can be reached by winning new customers while focusing on potential non-clients and concentrate on their requirements.

b) “Market development” can cover new markets that are currently out of scope of the actual marketing activities. This means that established borders of the market are skipped and new areas of markets can be developed. This means that the current product for the established markets must be adapted or redeveloped. A new product design can be used for new geographical market areas, as well as new fields of application of the product.

c) Important for the market development is the preliminary “product development”, that comes along with the continuous market developments. The development can be achieved by covering all aspects of requirements a product portfolio needs to be complete in sense of the client. Therefore “Me-Too” products can be licensed in to complete a product series that is already on the market and sharing a main part of the customers needs.

d) The market is growing and the product characteristics must be up to date with the current trends and market requirements. Diversification is the way, how to keep the products on the market and useful for the clients. New products can be used to create new markets. This can be done using synergy effect from existing products with new created ones, or integrate new marketing areas in the companies own marketing strategy.

The three ways for diversification follow those principles:

a) Horizontal diversification

The principle is the extension of the current product portfolio with similar products. E.g.

For a typical pharma-company that includes a Home-Care portfolio to their existing

Intensive-Care product portfolio

b) Vertical diversification

Vertical diversification uses the principle to enlarge the usability of the current

portfolio with products that are on the value chain of the companies products. E.g. a

pharma company that has only sales and marketing for a products series buys the

manufacturer of their productingredients.

c) Lateral diversification

The principle is the way, to include products with a new market area, that is not included

In the current portfolio and has the highest risk for the company. E.g. a

pharma-company with a product-portfolio for dermatological treatments for skin-care

include a product-series for mineral drinks to use before skin-care, or some after-sun

care products as addition to the standard skin-care program.

Ansoff developed his Concept in close relation to the sales market. But general rules apply also for the modern market with new tools and marketing systems like the personalized medicine.

The product-market mix of Ansoff:

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Table 3: Product-Market-Mix

For the development of the product-market mix of Ansoff, the important role of the driving value to gain profit our of these instruments was the creation of the market brand, without all other activities would not find the way into a complete marketing strategy. Making marketing for pharmaceuticals and distribute them via the agents has created a specific know-how what to do or not.

2.7 Market Brand

The Marketing situation in the pharmaceutical area has changed in the recent years dramatically. Some legislative restrictions for pharmaceutical products and distribution, as well as upcoming competition between the pharmaceutical brands and products have also influenced the client and the behavior to the prescription and non-prescription medicine.

The importance of Market Brands does not only apply to the consumer goods, it has recently reached also the pharmaceutical business and market philosophy. Brands can influence the company’s intangible assets and values. It is necessary to treat this value carefully and gain efforts to increase it steadily.

The market is changing in its structure and ranges. This can be seen in respect of a global trading area and as one of the biggest growing businesses. The average age of the people will increase and the number of people will grow as well, the aim of health is as growing as the awareness of the importance of health for the future of a welfare state, or even for development countries.

The awareness of health is increasing as well since the people in the internet-age learn how to get information about health and how to handle it, via the OTC (over-the-counter) products for instance. The initial concept of the pharmacies to consult and advise the patients with medical products has shifted to a more or less pharmaceutical distribution center, and does not have the power anymore to be the ultimate advisor regarding medical or therapeutically decisions. There is a growing majority of alternative experts and advisors that have more specialized information to nearly all directions of diseases.

In special cases of disease, also ethical aspects play a major role in the concept of a branding program. In case of the legal circumstances, all aspects of marketing and branding will be exploit in the so-called direct-to-customer (DTC) market. This is expanding rapidly the more products will be shifted from the RX-market (receipt exclusive) to the DTC-market.

Coming along with the increasing market of the DTC products and the OTCs, the branding includes also co-products like services that support the clients with medical treatment and therapies. This market is directly engaged with the branding and the image of the products itself. Not only new services for therapies or new products with better disease compliance are target of the modern life, also the trendy products like pharmaceuticals against obesity or erectile dysfunction are more and more the future of life style pharmaceuticals and trends.

Being a brand and acting on the market, several functions and abilities are linked with the brand and the product. As shot overview in the following table will classify the four groups of function of a brand.

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Table 4: Functions of a Brand

Seen form this table, a high competence to manage and organize marketing in accordance with a brand the right way. These brands need to be followed a well organized and challenging structure within the company.

The most relevant functions according this table are described next:

1) A brand is typical intellectual property and is based on a country-specific legal framework. The value of the brand is also a value in financial aspects. The market value of the brand can influence the share values of the company and directly influence the negotiation position in case of M&A activities. The better the value of the brand, the better the position to negotiate.
2) The function of orientation is important for the customer, since the customer is always used to choose, it is more and more difficult to tell between good and established or new products on the market. Therefore a brand can guide and help to make the right selection.
3) The margin level is important for the brand and the future of the products, since price and competition is growing and the pressure on lower prices is influenced by regulations and fix-price-strategy. This comes along with a better market transparency and drives the prices right down continuously.
4) A big issue in the pharmaceutical market is the missing diversification of a lot of products. Some products lack in the capability to cover a therapeutic segment as their own, without sharing the pharmaceutical qualification with a series of other products. Generics do the same and at least the only element for orientation is the brand and the different images that come with the product label to differentiate between the products.
5) The price acceptance is a very specific function related to a brand. This function is not only applicable to the pharmaceutical market, it is more generated from the consumer goods and more or less a phenomenon in the pricing strategy. A good example is the plattforming strategy of car chassis in the automotive industry. Several different models of different auto brands have the same chassis, but different styles and interiors. Even the quality and the functionality is the same, but the car has individual design, a individual price and has its own brand. Even the parts of the chassis are the same, the price of the car of the premium models has the higher price, with the same quality.

The same procedure is moving the pharmaceutical products with a standard set in pharmaceutical classes. The best example is Aspirinâ. The Acetyl-Salicyl-Acid is available in standard quality and standardization, which you can produce and sell it to a minimum price. But the originator and its Aspirin is still on top in sales and keeping the product quality on a high level. This phenomenon is still valid even manufacturers don’t make secret of the same product quality.

In the same manner the higher price of a product will influence the image and the price acceptance, the same applies to Over-The-Counter (OTC) products. Since these products will not have to follow the price regulations as the RX-products have to, the price flexibility can be used to generate and modify the brand of OTC-product series. The flexibility and extension of their portfolio, generic companies use this image to create their own image values and strategies. So the value of the products of generic companies will grow and so it’s value of the company’s umbrella brand.


[1] Antonovsky, A. (1997), Salutogenese. Zur Entmystfizierung der Gesundheit, pg. 36 f., Tübingen:DGVT

[2] Bengel, J. (2001). Was erhält Menschen gesund? Antonovskys Modell der Salutogenese. In BZgA (Ed.), Forschung und Praxis der Gesundheitsförderung, Vol. 6. Köln.

[3] Centrope_TT Programm of the BMWFJ, link:, 10.2.2012

[4] Trilling, Th. (2008), Pharmamarketing - Ein Leitfaden für die tägliche Praxis, 5ff, 2nd Ed., Berlin Heidelberg: Springer.

[5] European Pharmaceutical Market Research Association,, 20.02.2012

[6] BGBl. II Nr. 324/2008 §2, Arzneimittelbetriebsordnung 2009 - AMBO 2009 (Art. 84 EU RL 2001/83/EG)

[7] Kaplan, R. S., Norton, D. P. (1992), The Balanced Scorecard - Measures that Drive Performance, Harvard Business Review, Boston/USA: Harward Business Publishing

[8] Robbins-Roth, C. (2001), From Alchemy to IPO, 170ff, Cambridge: Perseus Publishing Group

[9] Ansoff, H. J. (1999), Management-Strategie. In: H.C WEIS (1999), Marketing. 11. Ed. Ludwigshafen: Kiehl

Excerpt out of 105 pages


Marketing and Distribution of New Food Supplement Products in the East European Market. A Business Plan
How Food Supplements are Part of Our Daily Life and May Harm Us
Joseph Schumpeter Institut Wels School of Applied Studies  (Joseph Schumpeter Institut Wels, School of Applied Studies)
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ISBN (eBook)
ISBN (Book)
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3857 KB
Supervisor's comment: "The topic of the master thesis covers the actual topic of the commercialized food industry and the way how the food supplements are integrated in our daily live. A pharmaceutical perspective behind unveils the small gap between food and pharmaceutical aspects. A businessplan shows how the integrated structure of commercial models fit into the new concept - a compact overview with pros and cons."
Health, Food Supplements, Business Plan, Market Distribution, Salutogenese, Marketing Tools, Pharma Trends, Advertising, Finance, Marketing Potential, USP, functional Food, Novel Food, pharmaceutical Products, Dietary Products, Cosmetics, Market Share, Bioactive Food, Funds, Grants, Venture Capital
Quote paper
Oliver Dinstl (Author), 2012, Marketing and Distribution of New Food Supplement Products in the East European Market. A Business Plan, Munich, GRIN Verlag,


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