The US major, Cardinal Health Inc, has finally pulled out from its ambitious pharmacy chain joint venture, Medicine Shoppe, after 10 years of unsuccessful operations in India. With the brand withdrawn from the market last year, the Indian investor in the joint venture is in the process of settling the liabilities with the retail sub franchisees, it is learnt.
Medicine Shoppe India, set up in 1999 through a tie up between Cardinal Health's pharma retail arm, Medicine Shoppe and the Mumbai-based Melrose Trading Company which had a majority stake in the Indian operations, had almost 130 to 140 shops at its peak time and had projected to reach 1000 outlets by 2010. The Andhra Pradesh Industrial Development Corporation (APIDC) Venture Capital and the Indian arm of the New York-based non profit global venture fund Accumen Fund were also partners in the venture.
Medicine Shoppe, the master franchisee of the Medicine Shoppe India, has terminated its partnership with the Indian firms in September, last year, and has withdrawn its brand from India. The retail shops under the brand name, run by individual owners on sub franchisee basis, has pulled off from the venture then. The few remaining with the investors is expected to complete liability settlements with the investor firm in next few months, according to sources close to the venture.
The company has been limping in performance in the recent past and the investors' board consisting of Acumen Funds and APIDC Venture Capital had remarked their disappointment in several meetings. There were also allegations against mismanagement of funds and Acumen buying the stake from Melrose Trading Company to become the major stake holder, said the source.
However, the market conditions in India and the flaws in operating model had also impacted the venture, informs another source. Higher costs of running the chain outlets and poor returns added with the severe protest from the trader's organisation had a compounded impact on the project. The company had to spend one third of its operational cost for rent for the outlet and had to compete with the local retail shops. The so-called boycott from the All India Organisation of Chemists and Druggists (AIOCD) has resulted in 15 per cent stock out ratio even in the peak time of the company, he alleged.
The company, which had a total revenue of Rs 50-60 crore from the entire network almost three years back, had resulted huge losses to the investors in past two years. A final attempt by Acumen Funds to restructure the company and to get over from closure by assigning one of its top officials in US to India has also not produced any result. The company had around Rs 40 crore capital at the time, though it could not utilise it for survival due to various reasons. The investors were willing to pump in more funds for the revival, but the success of operating model was under doubt, said the source.
Medicine Shoppe India had its operation in Maharashtra, Gujarat, Goa, Delhi, Uttar Pradesh, West Bengal, Andhra Pradesh and Karnataka.