A customer at a store of Long Chau pharmacy chain. As of December 2022, Long Chau pharmacy chain of the FPT Digital Retail Company (FRT) ecosystem has officially over 1,000 stores, covering 63 provinces and cities in Vietnam (Photo: VNA)The pharmaceutical retail network has expanded strongly. According to marketresearch organisation IQVIA, Vietnam had 55,300 drug stores in 2016, with 185stores belonging to modern drugstore chains. In 2021, the total number of drugstores decreased to 44,600, but the number of stores belonging to modernpharmacy chains increased to 1,600.
In 2022, the number of large modern drugstore chains continued to increase. Asof July 2022, the number of stores of the Pharmacity chain increased by morethan 40%, those of the Long Chau chain surged by more than 70%, and those ofthe An Khang chain nearly doubled compared to the previous year.
Many new companies have also entered the market, including Wincommerce whichowns the Winmart convenience store chain of 3,000 stores, and Viettel, whichowns a retail network of 370 telecommunications stores.
As explained by SSI Securities Company, modern-model pharmacies are gainingmarket share from traditional pharmacies, as the Government graduallyintroduces stricter regulations for pharmaceutical retailers, imposing strictercontrol over medicine bought with a prescription.
The increase in consumption of vitamin products or supplementary foods duringthe COVID-19 pandemic also accelerated the opening of pharmaceutical retailstores.
Currently, drugstore chains have also diversified their product portfoliosincluding other fast-moving consumer goods such as personal care products,cosmetics, confectionery and beverages, thereby increasing revenue and profit.
Although consumer spending is clearly affected by rising inflation, spending onpharmaceuticals is likely to remain stable due to the necessity of products,SSI Securities Inc experts said.
On this basis, pharmacy chains will be able to pass on the increased costs tocustomers. Drugstore chains that are actively opening new stores can negotiatebetter terms with suppliers, which in turn can increase margins.
As of December 2022, the Long Chau pharmacy chain of the FPT Digital RetailCompany (FRT) ecosystem has officially surpassed 1,000 stores, covering 63provinces and cities in Vietnam, exceeding 125% of the plan in 2022. FRT alsoexpects to increase the total number of stores to 3,000 in the next five years.
Analysts of MB Banking Securities (MBS) expect that while FRT's phone businesssegment is slowing down due to market saturation, the pharmaceutical segmentwill drive FRT's profit growth in the long term.
FRT will continue to open Long Châu pharmacy stores because the proportion ofmodern pharmacies in pharmaceutical retail is currently only about 5% and LongChau pharmacy chain has now recorded a net profit.
An Khang pharmaceutical retail chain managed and operated by Mobile WorldInvestment Company (MWG) has witnessed strong expansion, from 178 stores in2021 to 529 stores in 2022. In 2023, An Khang is expected to continue to expandits scale.
With MWG's advantage of having a customer base from its technology and consumerelectronics supermarket chains, An Khang can benefit to increase cross-sellingof products, thereby increasing profit margin.
According to the General Statistics Office, the index of industrial production(IIP) in 2022 was estimated to increase by 7.8%; in which, the production ofdrugs, pharmaceutical chemicals and medicinal herbs had a high growth rate, at19.2%.
Analysts said that this was a big space for many retail businesses to continueto grow thanks to operating the pharmaceutical segment.
A survey conducted by Vietnam Report Company (Vietnam Report) shows that thenumber of health expenditures increased from 16.1 billion USD in 2017 to more than20 billion USD in 2021, expected to reach 23.3 billion USD in 2025 and 33.8billion USD in 2030, with a compound growth rate from 2020-2030 of 7.6%.
Vietnam is also one of the countries with the fastest aging population in theworld. Consumers' awareness of healthcare is increasing and people's incomesare rising, leading to more spending on healthcare and pharmaceutical productsper capita.
However, General Director of Vietnam Report Vu Dang Vinh said the top fourchallenges affecting production and business activities of pharmaceutical andhealthcare enterprises were increased logistics costs, competition amongenterprises in the industry, cost of raw materials and pressure from risingexchange rates./.
VNA
