Modern pharma grows more colourful
The modern pharmacy retail segment is welcoming an exciting new entrant in Japanese drug and cosmetics retailer Matsumotokiyoshi Co., Ltd, urging existing players to dust down their racing goggles.
Matsumotokiyoshi has agreed to form a joint venture with Lotus Food Group JSC to operate a drugstore chain under the name MatsuKiyo in Vietnam. The move is part of its broad plan to step up its operations outside Japan and tap into Vietnam’s strong demand for Japanese cosmetics and supplements.
The drugstore operator said in a statement that it will sign the joint venture agreement later this month to establish Matsumotokiyoshi Vietnam JSC in Ho Chi Minh City. The two companies inked a basic agreement on joint store operation in July but have not yet disclosed the location and timing of a first store opening in the Southeast Asian nation.
With the investment capital of VND31.5 billion ($1.36 million), the company is 51 per cent owned by Matsumotokiyoshi, 48.87 per cent by Lotus Food Group, and 0.13 per cent by Le Van May, president and CEO of the local partner.
Established in 1932, Matsumotokiyoshi is a famous Japanese drugstore chain that boasts a massive selection of goods, including medicine, makeup, cosmetics, oral hygiene products, and supplements, among others. Besides over 1,600 stores at home, the Japanese company has also launched store networks in Thailand and Taiwan.
In the face of the shrinking drugstore market in Japan, Matsumotokiyoshi has been exploring business opportunities in Southeast Asia.
According to a 2018 report from Business Monitor International, Vietnam’s healthcare market had a value of $17.4 billion in 2018. At a per capita level, spending is expected to double from $170 in 2017 to $400 in 2027. Meanwhile, the country’s pharmaceutical market had estimated revenue of $5.9 billion in 2018, an 11.7 per cent increase on-year, which makes Vietnam the second-largest pharmaceutical market in Southeast Asia.
Market research and business intelligence provider Statista also found that revenue in the domestic cosmetics and personal care market amounted to $1.62 billion in 2018. The market is expected to grow with an annual growth rate of 8.6 per cent between 2018 and 2021.
Matsumotokiyoshi’s foray reflects the competitive landscape of Vietnam’s health and beauty market where modern pharmacy retail chains such as Pharmacity, Medicare, and Guardian have already secured strong footholds. Pharmacity is now the largest pharmacy retail chain in Vietnam with a plan to extend its network to 1,000 stores by 2021. Medicare was the first beauty, health, and wellbeing retailer in the Vietnamese market in 2001. Meanwhile, Guardian is a retail chain operating under the Dairy Farm Group, a leading pan-Asian retailer.
In January, Watsons, the leading health and beauty brand in Asia and Eastern Europe, also made its official debut with the launch of its first flagship store in Ho Chi Minh City. The retailer has plans to open at least 50 outlets across Vietnam over the next five years to capitalise on the market potential.
Commenting on the move of Matsumotokiyoshi, Ralf Matthaes, managing director of Infocus Mekong said “Like any new modern trade businesses entering Vietnam, competition breeds awareness and usage. Overall this is good for the industry in terms of building brand recognition and ultimately usage. Japanese retailers are not that well known in Vietnam, however, Japan’s image and brand association are high and will drive growth of the overall foreign pharmacy and cosmetic industry.”
When comparing modern pharmacy outlets with traditional ones, Matthaes noted that the key advantages are threefold. First and foremost is the constancy of product and service delivery. Consumers will be able to access more products and more consistent services and advice from these new pharmacies, as they battle for positioning, market share, and profits.
Second, pricing should become more consistent and, in some respects, cheaper as distribution costs and sales volumes should create savings for consumers. Finally, chains deliver more convenience. Via technology brought in by these new players to facilitate online purchase and prescription order filling, consumers will have easier and faster access to medicine.
However, to attract more consumers, the absolute key lies in building trust. These new chain pharmacies need to develop trust in the consumer’s mind, which will largely be driven by the relations they build with consumers over time. Also, these chains need to have a solid footprint of outlets in convenient locations to drive sales.
“Chains like Matsumotokiyoshi need to develop a brand positioning that provides consumers with a reason to believe. In other words, a unique sales proposition in terms of access, product service, and price is needed to win the hearts, minds, and wallets of Vietnamese consumers,” he added.
According to Bertrand Sauvageon, vice president at DKSH Business Unit Healthcare, in the last twelve months, the number of modern pharmacy chain outlets – which include local heroes such as Pharmacity, Phano, and Medicare, and multinational champions like Guardian – have increased by more than 75 per cent and the pace is accelerating with a few players who are opening nearly one outlet every other day.
“Modern pharmacy chains still represent roughly 1.5 per cent of the total number of licensed pharmacies, but already hold 5.5 per cent of the total pharmacy channel retail sales value. This share has been growing by more than 1 per cent a year in the last two years and is expected to grow faster in the coming years,” he said.
Sauvageon added that the overall volume of imported medicines is growing by a high single-digit percentage while modern pharmacy chain sales are growing twice as fast as in independent pharmacies. However, this overall strong growth is hiding a very distinctive dynamic of pharmacy chains, with many having difficulties to grow sales per established outlet. Moreover, few top players experience both a double-digit growth of sales in their established outlets and incremental growth from rapidly opening new stores. VIR
With the average pharmaceutical import turnover of $245 million per month, the figure of the whole year of 2019 may reach $3 billion, equaling 50 per cent of the whole scale of the market.
According to experts, the boost in attractiveness of the Vietnamese market comes at a time when the business environment for drugmakers in neighboring countries has not been favorable.