The retreat of pharmaceutical retail chains

The competition between pharmaceutical chain stores is getting fierce as domestic and foreign enterprises are speeding up the scale to gain market share in the market’s “pie” estimated to be worth 6.5 billion USD / year. An even bigger ambition, from the pharmaceutical channel, will expand into the larger market, including health and beauty products.

Speaking at the annual general meeting of shareholders in 2019 in March, Ms. Nguyen Bach Diep – Chairman of FPT Retail said, after two years of acquiring Long Chau – a long-term pharmacy brand in Ho Chi Minh City, the number The drugstore increased from 4 to 22. But less than three months later, interviewed by Forbes Vietnam, Mrs. Diep said that Long Chau chain has opened 35 drugstores in Ho Chi Minh City, Dong Nai and Tien Giang. On average, each store brings in 1.6 billion dong / month of revenue, breakeven or earn after six months of operation.

FPT Retail is one of the energetic “athletes” in the race to open the retail chain of pharmaceuticals, health care and beauty products, especially in Ho Chi Minh City and Hanoi. “We will accelerate to reach the chain of 70 stores this year and expand to the provinces and cities by 2022 to reach 700 stores.” Mrs. Diep confirmed.

The chains accelerate faster when the “multi-sector” big business Vingroup joins the game. The speed of VinFa “overwhelmed” the previous businesses, at the end of 2018 they simultaneously opened 11 VinFa pharmacies in Hanoi, by the end of May had increased to 38 stores, preparing to open simultaneously dozens of Other shops in HCMC. The first 150 pharmacists for the VinFa chain in Ho Chi Minh City have been recruited and recruitment announcements are ongoing.

A Long Chau drugstore is located right next to FPT Shop. Photo: document.

Vietnam’s pharmaceutical market in 2019 is estimated to reach US $ 6.5 billion, according to Business Monitor International. In particular, the market for over-the-counter medicines (OTC) is estimated at US $ 1.6 billion, with an average growth in the period of 2019-2022 is 9.5% / year. According to Ms. Diep’s comments, the annual pharmaceutical consumption scale is about 4.5 billion USD, equivalent to the size of the mobile phone market and the growth rate is always at double digits.

If at the end of 2017, Pharmacity has just opened the 78th store in Ho Chi Minh City, the current drugstore chain has exceeded the number of 200 stores, one year earlier than the plan. They also just opened the first two stores in Hanoi at the end of May, in the plan to open 30 stores in the North until the end of 2019. At the time of announcing the investment from Mekong Capital in early May, they planned plan to expand the network 5 times in the same period: reach more than 1,000 stores by 2021.

Not disclosing the investment capital, but Mekong Capital said “it will help Pharmacity continue to improve operations and expand the system across the country.” Chad Ovel – general manager of Mekong Capital said: “Pharmacity is a seller. The first retail pharmacy in Vietnam showed that all regulations and principles in this industry can be complied with and the chain is still able to achieve the profitability of each store. “

Not only domestic enterprises, foreign giants have also entered this field. Pioneering in this market can be seen, the retailer of medicine and health care products Century Pharma of Indonesia. Century Healthcare store chain was formed after this retailer acquired Vistar drugstore chain, currently 24 stores are operating, located in many large shopping centers of Ho Chi Minh City such as Bitexco, Saigon Center, Aeon Mall, Giga Mall …

In an internal statement, the parent company, Pharos Indonesia, also said it was expanding pharmaceutical production to Vietnam with a 6,000m factory.2 is under construction in Binh Duong. Pharos appreciated the potential of the Vietnamese market because “this is one of the fastest growing economies in Southeast Asia”.

A VinFa pharmaceutical store is located right next to Vinmart + on Bau Cat Street, Tan Binh is preparing to operate. Photo: Hai Dang.

The trend of the pharmaceutical retail chains shows the expansion of the retail channel of health care and beauty products. An important market channel for personal consumption currently dominated by two major chains, Guardian and Medicare. Many companies, both domestic and foreign, are taking this trend and promoting this product channel within the pharmaceutical sales chain.

Pharos internal statement said that when the factory is completed, they will produce nutritional supplements, then expand to pharmaceutical production. The company has recruited key personnel to manage the factory. Many experts say that medicine for people is an indispensable channel, but the trend of access to primary healthcare products is clearly emerging in Vietnam.

Given that with the pharmaceutical chain, functional foods and cosmetics have the highest profit margins, and the general trend of many successful pharmacy chains in the world is to promote functional foods and cosmetics, Mrs. Diep said. Long Chau will also follow that trend, but for now it still focuses on drug business.

According to Mrs. Diep, people are still at the stage mainly interested in diseases. In the future, when the purchasing power of people is increasing, they will focus on spending on beauty cosmetics, functional foods to improve health, prevent disease … “Now, people are mainly paying More money for cure than prevention. ”Mrs. Diep said.

Also taking advantage of the experience of operating the retail chain to expand into the pharmaceutical segment, previously, Mobile World has added the pharmaceutical segment to the business ecosystem when acquiring Phuc An Khang drugstore chain (now An Khang), but this chain currently has 11 pharmacies, no longer part of the Mobile World priority strategy.

The scale of retail chains of pharmaceuticals and healthcare products as of the end of May 2019. Source: synthesis.

Sharing with the press yesterday, June 20, at the company headquarters, Mr. Nguyen Duc Tai – President of Mobile World said that currently, An Khang is not the biggest priority of Mobile World. Instead, the company cornered “strong military generals” for the Bach Hoa Xanh supermarket chain. “We do not want to hug, if pouring investment into An Khang will weaken Bach Hoa Xanh. Between the few billion dollars and the 50 billion dollars market, it’s easy to make a priority choice. ”

For Mobile World’s president, the pharmaceutical retail market is subject to too many laws, while the fact that the over-the-counter pharmaceutical business is still inadequate. “To please customers, many pharmacies still sell free antibiotics; or the stores belonging to the pharmaceutical chain but still have to register for individual businesses, or register each store individually … The game in this industry is still very ‘lungy’, ”Mr. Tai cited.

However, Mr. Tai still thinks that the field of health care is a “terrible” market. Therefore, the current strategy of The Gioi Di Dong is to “keep a foot” in this industry to wait for opportunities for joint ventures and partnerships, especially to focus on expanding to the field of functional foods, vitamins … “This is new. is a ‘terrible market’. When people are aware of their higher health, this market will explode. Then, we will get in and get involved very quickly, “he said.

Bich Tram
* Source: Forbes Vietnam


Related Posts

Leave a Reply

Your email address will not be published. Required fields are marked *