With around 25 players and a total of over 2000 pharmacy outlets, the Indian pharmacy retail chain industry is currently growing at a rate of 60 to 100 per cent per year. Though the current size of organised retail sector is only around three per cent of the total pharma retail industry, with the players gearing up for a rapid growth in the next two to three years the total number of chain outlets in India is expected to cross 10,000 by 2010, informs Anupam Shukla, Managing Director, Medica Pharma Pvt. Ltd, a part of MedicaSynergie Pvt Ltd, Kolkata.
"Five years back, only 5 to 6 chains were present and today the number is above 25. The new foreign direct investment (FDI) norms will allow more foreign companies to venture into India. Online pharmacy is expected to take their root in India in the coming years. Apart, third party administrators (TPAs) would also start empanelling the pharmacies and chains would have an edge due to uniform and centralised system," avers Rajendra Pratap Gupta, advisor, Emami Retail Venture, Emami Groups and former CEO of Medicine Shoppe India.
Almost all retail companies in the country are currently into expansion mode and major companies expect to reach a target of 700 to 1200 stores within 2010. For instance, India's largest pharmacy chain under Apollo Hospitals Group is expected to have 1000 pharmacies by 2009 and is currently adding one retail outlet in every 33 hours. Also, Medicine Shoppe, a master franchisee of the $75 billion Cardinal Health Inc, is planning to have 1000 shops by 2010, while Subhiksha, a South India-based retail chain, which already has more than 1000 outlets, is looking to add more retail stores in its kitty in 2008. Similarly, Fortis Healthworld, a healthcare arm of Ranbaxy Laboratories Group, is planning to roll out 1000 pharmacies in 400 towns within next two to three years.
Further, Hetero Med Solutions Limited, a retail chain diversified from the Hyderabad Hetero Group, is expected to launch 1000 retail outlets in South India within 2010, while the North India-based Global Healthline (98.4 degrees), which set up its first shop in Gurgaon in 2003, is all set to set up 300 shops by 2011 with an investment of Rs 100 crore. Recently, the North Indian retail major Guardian Lifecare announced a Rs 100 crore investment to establish 150 more pharma outlets in the country. The company has also plans to foray into the Western India market and add another 150 stores across India by the end of March 2009, according to Ashutosh Garg, chairman and managing director, Guardian Lifecare.
Some of the other major retail chains like the Bangalore-based LifeKen, Ahmedabad-based Planet Health, Delhi-based CRS Health and Hyderabad-based Medplus Healthservices Pvt Ltd have also charted their plans to exploit the emerging market.
The Indian pharmacy retail scenario shows the development, as the number of mom and pop pharmacies in the country have increased from 125K to 800K in 2007, while the ratio is one pharmacy per about 1325 people. The average daily sale in these shops is recorded at Rs 1125, according to Shukla. However, Gupta says that the annual turnover of pharmacies is reported at Rs 41000.
The current scenario depicts the upsurge of the retail pharma chains in the country, which are opening several outlets at frequent intervals, expecting a turnaround in future. The Apollo Hospitals, the pioneers in pharma retail industry, reports that its retail wing has turned around. However, the earnings before depreciation, interest, taxes and amortisation (EBDITA) margins are depressed due to the aggressive rollout. "We have got 530 retail pharmacies, while the total number of pharmacies is 610. We are adding a pharmacy every 33 hours. We have added 300 pharmacies this year. But the pharmacy division as a whole is making profit on the back of a topline growth of 39 per cent," Sunita Reddy, ex-director of finance, Apollo Hospitals, was quoted as saying.
The outlook of firms like Subhiksha also points to this trend. The company has already revealed its plan to spread into a vast geographical area with announcing discounts. The company has also plans to open 24X7 pharmacy section on select locations, according to sources. This Rs 250 crore chain has over 1,000 outlets nationally spread over 90 cities. However, the company's method of operation, which includes 10 per cent discount on medicine, has invited wide protest from All India Organisation of Chemists and Druggists (AIOCD).
While all the retail pharmacy chains project their quality of service as unique from the unorganised retail outlets, many of these companies have their own strategy to reach more customers.
According to industry experts, companies like Medicine Shoppe and Guardian Lifecare are exploring the rural areas, while Apollo is growing through its hospital chain. On the other hand, Medicine Shoppe has set its super specialty stores and special loyalty cards, the smart cards for the customers' support to lure more business. Sehat, its pharmacy-cum-clinic for low-income urban groups, which dwell in slum areas in major cities, is a pure strategy to lure more customers. Other retail chains like the LifeKen has their own customer support schemes to create a permanent link with the customers.
On its part, Himalaya Drugs, which has plans to set up 521 stores by 2010, has tied up with several non-pharma retail majors, including Spencers, Big Bazaar, D'Mart, Nilgiris, Vishal Mega Mart, Lifestyle and Big Shopper and the pharma retail companies comprising Apollo Pharmacies, Medicine Shoppe, CRS Health, Health&Glow, Guardian Lifecare and 98.4 degrees, the chain under Global Healthline, to reach the targeted market.
Pharma companies like Ranbaxy, Zydus Cadila, Hetero Drugs and Himalaya Drugs currently have their slots and future plans in the retail market space. Besides, corporate giants like Reliance Anil Dhirubhai Ambani Group and the fast moving consumer goods (FMCG) giant Dabur are also into the segment with unique game plans. Dabur, with its wholly owned subsidiary - Health and Beauty (H&B) stores - has entered into health, beauty and wellness retail segment by setting stores christened as 'new-u', of late.
However, the growth prospects in this sector have also created its own challenges, as is in any other industry. The strife with the unorganised retail sector and its organisations coupled with stiff competition from the corporate retailers form the major challenge to the sector.
"The mom and pop shops are finding it difficult to survive in today's low margin and the increased competition in the retail pharmacy space may lead a lot of chemists to quit the job," says Gupta. This fear has switched the panic button on among the unorganised retail sector. The AIOCD, the largest association of pharmaceutical distributors and retailers in the country, opposed the organised retail movement and the corporate hospital chains right from the beginning on this ground. Currently, the organisation is in advanced stage of setting up its own distribution company, including a retail chain for pan India operation.
The increased competition would lead the organised players to change their strategy to various other options for survival. The experts predict emergence of a new class pharmacies with focus on niche areas like generic pharmacy and specialty pharmacies on particular therapeutic segments in the future. The forecasts also points to an increase in FMCG business in retail pharmacies. Currently, most of the pharmacies sell 70-80 per cent medicines and 30-20 per cent non pharma products. This pharma-FMCG sales ratio may change to 40 per cent and 60 per cent, respectively in next 10 years, comments Gupta and Shukla.
He added that the retail pharma industry has a high growth opportunity in India with the entrance of insurance companies to the healthcare sector. At an advanced stage of operations in the sector, the insurance companies may look to accredit the retail outlets for reimbursement of drug prices to its customers. The accreditation would be based on certain conditions on standards maintained by the pharmacy outlets. It will eventually help the organised retail sector to win the race. However, the fears of unorganised sector about its existence are baseless, as the loyalty of local retail outlets would have a space in future also, averred the expert.