Pharmacuitical Industry;Retail Perspective
Pharmacy Retail Overview
After FMCGs, food and entertainment, pharma retailing could well be the next big hope in retail, with an increasing number of corporates foraying into the segment. In fact, the past two months alone have seen two corporates launching branded pharma retail stores.
On offer for new players entering the segment is the massive pharma retailing pie in India, estimated at about Rs 30,000 crore. In fact, according to some estimates, 15 per cent of the 51 lakh retail stores in India are chemists.
"Pharma retailing will follow the trend of becoming more organised and corporatised as is seen in other retailing formats (food, apparel etc)", A few corporates who have already forayed into this segment include Dr Morepen (with Lifespring and soon to be launched Tango), Medicine Shoppe, Apollo pharmacies, 98.4 from Global Healthline Pvt Ltd, and the recently launched CRS Health from SAK Industries. Zydus Cadila and Cipla too are rumoured to have plans for this segment. In the south, RPG group's Health & Glow is already in this category, though it is not a pure play pharma retailer but more in the health and beauty care business.
In fact, recent surveys show that healthcare now ranks third on the Indian consumer's spending list, higher than apparel or entertainment. And it is not only rising disposable income among the Indian middle and upper classes or growing awareness about health, which is responsible for this phenomena. Points out R.B. Smarta, Managing Director, Interlink Healthcare Consultancy, "Expenditure on healthcare is bound to increase, particularly due to changing lifestyles. For instance, while consumption of packaged food products are increasing, consumption of grains is going down. Such shifts in lifestyle means getting into different nutritional deficiencies tomorrow."
Though corporates are putting in major investments in this segment, it would be some time before they actually manage to displace the position of the neighborhood chemist, due to the sheer reach and size of the latter. However, they are hoping that a higher degree of attached credibility combined with value-added services that are being provided would attract consumers to these novel outlets.
Another advantage is that when a consumer usually visits a chemist with a prescription for a medicine, it tends to be unavailable and a substitute is offered in turn (the brand which brings in higher margins for the chemist). This situation can be avoided at a branded store.
Meanwhile, though analysts agree that branded outlets will catch on in tune with international trends, these would co-exist hand-in-hand and not result in the phasing out of the chemists, primarily because such outlets would cater largely to the upper and middle-end of the population.
The phenomena of branded stores could become even more widespread, once insurance players enter this field, says Smarta.
Industry officials further point out that most of the branded pharma retailing outlets are unlikely to operate as pure pharmacies. "Even at the chemists (not taking into account hospital pharmacies) now, the percentage of prescription related items has declined from 99 per cent some years back to about 40-50 per cent", says Smarta.
The rest of the stock makes up of health related items. The reason could lie in the increasing awareness among consumers about concepts such as food supplements, nutraceuticals, OTC products (also known as FMHG products) or even alternative medicines (which do not require prescription).
Says Dr Morepen's Nagarajan, "Research shows that a consumer when affected by an illness tends to resort to self-medication and waits for about three days before approaching a doctor. This could be due to hectic lifestyles and increasing pressures of time. Also, apart from ailments such as cold, cough, stomach-related problems and aches, there are new lifestyle related illnesses such as stress which a consumer now faces. These were unheard of earlier."
Keeping this in mind, Dr Morepen is set to take health to a new platform altogether. The company is all set to launch `Tango' outlets during the current quarter, which Nagarajan says would encompass both services as well as the basic product level.
The outlets, to be initially rolled out in North India, would provide health services such as a health bar, fitness centre, beauty parlour, a spa and much more, apart from a pharmacy and other health and beauty related products. The company is investing a sizeable sum in the venture, and has even roped in an international design house to design the brand proposition for Tango.
Pharmacy retail current status and future anticipation
The current pharmacy retail market size is estimated to be of US$ 4.5 billion and it is expected to grow to US$ 8.7 billion by 2010. Pharmacy retail is growing at the rate of 20-25 per cent annually. The organized pharmacy retail chain is dominated by 12-15 big players. There are more than 3500 organized retail pharmacy outlets in India and it is expected to grow to10,000 by the end of 2010.
The organized pharmacy retail market is dominated by big industrial houses like Ranbaxy's (Fortis), Pantaloon (Tulsi), Reliance Retail's (Reliance Health and Pharma) and Subhiksha as well as health care players like Apollo Hospitals Group's (Apollo Pharmacy) , Medicine Shoppe , Zydus Cadilla's (Dial for Health), Sagar Drugs & Pharmaceuticals' (Planet Health), Morepan's (Life Spring), Lifetime Healthcare's (LifeKen), Global Healthline (98.4), Guardian Lifecare's (Guardian Pharmacy), MedPlus to name a few.
Modes of Operation:
- Company Managed Stores - Company owned pharmacy outlets are owned and manage by company itself. Major pharmacy chains in India like Fortis, Apollo, Alchemist, Subhiksha and Dial for Health have their own pharmacy chains
- Franchisee - Medicine Shoppe, MedPlus, Medicine Shoppe operates through the model of franchisee stores in India.
Pharmacy Chain Formats:
- Hospital Pharmacies - They catered mainly to the requirements of patients admitted in the hospital. They were housed in the hospital building and dispense a limited number of medicines. The average size of such stores is 150-200 sq. ft
- Retail Stores/Standalone stores - The second category of stores, near the residential areas, provide the benefits of proximity to consumers. Some of these stores offered home delivery. The target customers of the store were the educated middle and upper class households
- Malls/Shop-in-shops - The biggest advantage, most retailers say, of having in-store outlets at supermarkets or departmental stores is the fact that popularity of either brand rubs off on the other. Guardian pharmacy recently signed an agreement to open outlets at Spencer's stores in east India and is negotiating rights for northern India too. Spencer’s has tie-up with LifeKen Medicines for store-in-stores at its Daily stores in the South. New-u, retail outlet of H&B Stores Ltd. are located in Malls.
- Townships - Many pharmacy chains are planning to set up their pharmacy chain in townships. Apollo is planning to set up Medicity near Pune. Apollo has signed an agreement with Hindustan Construction Co (HCC) to set up the medicity inside the upcoming project named Lavasa near Pune.
Operational Pharmacy Chains in the Indian Market:
Apollo Pharmacy: A division of Apollo Hospitals Enterprises Ltd., is India's first and largest branded pharmacy network, with over 720 outlets in 17 states. Apollo pharmacy is accredited with - International Quality Certification and is open for 24 hours. Apollo will have 1000 pharmacies by the end of financial year 2008-09. It is giving free health insurance on purchase of above Rs. 6000 in a year.
Fortis Healthworld: Pharmacy chain promoted by the Singh family of Ranbaxy. It operates under two models - Company owned and operated stores and Franchisee owned stores. Currently Fortis has around 40 stores and planning to expand its presence to over 100 cities.
MedPlus Health Services: Hyderabad based pharmacy chain, MedPlus was launched in 2006 currently operates more than 500 stores in Andhra Pradesh, Maharashtra, Karnataka, Tamil Nadu, Gujarat and Rajasthan and plans to increase it to 1000 by March 2009. Mauritius based iLabs Management LLC has invested $5.2 mn in MedPlus.
Tulsi: Tulsi is a pharmacy retail chain of Future Group. Most of the Tulsi outlets are located in Big Bazar. Future Group currently has over 35 Tulsi outlets across the country.
LifeKen: promoted by Lifetime Healthcare Pvt Ltd is a leading Pharmacy Retail chain in Bangalore and Chennai. LifeKen operates in total 82 Stores in Bangalore, Chennai and Mumbai. The list comprises 37 LifeKen Stores, 11 Pill and Powder Stores and 7 stores in Spencer's Stores in Bangalore. LifeKen is planning to open new retail pharmaceutical chain in the cities of Mumbai, Pune, Hyderabad and Kochi and is also set to expand to other cities in the South and West and then to North and East.
Guardian Lifecare Pvt. Ltd is North India's largest retail chain of Pharmacy, Wellness, Health and Beauty Retail outlets. The company has 149 outlets in 16 cities. Guardian Lifecare plans to open another 150 new stores across India by March 2009 and Guardian chain will grow to 400 stores by March 2010 and will be investing Rs.100 crore to fund our expansion.
98.4: a pharmacy chain operating in Delhi and NCR is a brand of Global Healthline. Parent company has presence in Europe and the Middle East. 98.4 has 27 stores in India and is expected to ramp up the count to 300 by 2011.
Foreign Player:
Medicine Shoppe, the Indian arm of global chain Medicine Shoppe International started its operations in India in February 1999. Medicine Shoppe follows the model of franchisee stores in India.
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