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WhitePaper

ScalingforSuccess

SoutheastAsia’sRetailPharmacySectoronPath

TowardsConsolidation,withChainPharmaciesSetto

GrowinImportance

AKRIMJANTARAPRAPA,AssociatePrincipal,StrategyConsulting

ANTONKIM,AssociatePrincipal,StrategyConsulting

Tableofcontents

Introduction2

SEAretailpharmacymarket:Anupdate3

Indicatorsforconsolidation5

Conclusion10

Abouttheauthors11

AboutIQVIA11

Introduction

ThepharmaceuticalmarketinSoutheastAsiahasgonethroughfundamental

shifts,underpinnedbyongoingdemographictrends,economicuncertainties,

andglobalgeopoliticaldevelopments.Retailpharmaciesareincreasingly

pivotalstakeholderswithinthislandscape,withgreateraccessibilitytothe

generalpopulationthanevenbefore.

Inthisreport,wewillexploreemergingintegrationstrategieswithinSoutheast

Asia’sretailpharmacysector,highlightingtheongoingtrendtowards

consolidation.Thepaperwillshedlightonkeyimplicationsforindustry

stakeholdersacrossthevaluechainandoutlinestepsthatmustbetakento

succeedinthecompetitiveenvironment.

|2

SEAretailpharmacymarket:

Anupdate

factorsaredrivingupratesofchronicailmentssuchas

diabetes,cardiovasculardisease,andchronickidney

disease,leadingpatientstomanagetheirconditions.

TheretailpharmacymarketinSoutheastAsia(SEA)

•OTCsub-segment:ThekeydriversintheOTC

hasseenarobust9.2%compoundannualgrowthrate

categoryarecoughandcoldtreatments,aswellas

(CAGR)intheyears2021–2023(Figure1).Thisgrowth

painreliefanddigestivehealthproducts.Additional

isbeingledbythePhilippines,thelargestmarketin

fast-growingsub-segmentsincludesupplements,

theregion,whichgrewatasolid9.8%overthesame

period.Meanwhile,substantialexpansioninboth

Malaysia(18%CAGR)andThailand(13.4%CAGR)is

furtherpropellingthismarketforward.

infantnutrition,andcontraceptives.

Growthhasbeenseenacrossboththeprescription

andover-the-counter(OTC)sub-segmentswithin

theretailpharmacychannel,eachdrivenbya

distinctsetoffactors:

•Prescription(Rx)sub-segment:Treatmentforchronic

illnessisaprimarygrowthdriverintheprescription

sub-segment.Ageingpopulationsandlifestylerisk

Figure1:Retailpharmacygrowthbycountry(SEA)(MATQ32021-2023,USDBn)

+9%

9

4(38%)

10

4(38%)

11

4(38%)

1(16%)

1(12%)

1(12%)

1(11%)

1(10%)

2(17%)2(17%)

1(12%)1(13%)

1(12%)1(11%)

1(11%)1(10%)

1(10%)1(10%)

202120222023

Indonesia-2%Philippines+10%Thailand+13%Vietnam+4%Malaysia+18%Singapore+10%

RetailpharmacymarketincludesRxandOTCproductssoldinindependentpharmacy,largechains,conveniencestoresandsupermarkets

Source:IQVIAMIDAS,IQVIAAnalysis

3|ScalingforSuccess

Growthintheretailpharmacymarketcontinuesto2.Pharmaciesareenhancingtheirofferingstoexpand

bedrivenbythefactorsoutlinedin2023’sIQVIASEAcapabilitiesandvalue-addedservices.

PharmacyRetailPlaybook(Figure2),viz.

3.Consumersincreasinglypreferpharmaciesfor

1.Governmentinitiativesarepushingdispensingmedicationanddrugpurchasesoverhospitals

towardsthecommunityandincentivisingandclinics.

collaborationsbetweenhospitalsandpharmacies.

Figure2:Driversoftheshifttoretailpharmacies

Governmentinitiatives

encouragingpharmacy

dispending

Expandingvalue-added

servicesatpharmacy

Growingconsumer

preferenceforpharmacies

•Increasedcollaboration

betweenpublichospitals

andlocalspharmaciesfor

medicinepickupsatthe

nearestpharmacies

•Dispensingoflong-term

prescriptionsforchornic

patients

•Pharmacynetwork’s

growingcapability

andprovidingvalue-

addedservices(patient

education,chronicdisease

managementservices)

•Accomodatingdoctor

consultationcounterwithin

pharmacypremisesfor

minorailments

•Increasingawarenessof

servicesbypharmacies

amongconsumers

•Growingpatientfootfall

atpharmaciesduetothe

reluctanceonthepart

ofmanypatientstovisit

hospitalsandclinicsfor

minorailments

Flagsindicaterelevantdriversforthemarkets.

Source:IQVIAWellTrackReport(2020to2023)

Thesefactorsaresettocontinueplayingapivotalrole

intheyearstocome.

Withincreasingopportunitiesforkeyplayersinthe

market,wealsoobservealong-termtrendtowards

integrationandconsolidationasmostSoutheast

Asianeconomiesmature.InthisWhitePaper,we

willexaminethistrendtobetterunderstandits

implications.

|4

Indicatorsforconsolidation

Growingeconomiesandcorrelationwithchainretailers

Figure3:ModernTrade(Chainedretailers)shareas%oftotalretailsales

100%

90%

80%

Korea

JapanFrance

Germany

Australia

USA

Singapore

70%

60%

50%

40%

30%

Malaysia

Thailand

China

Philippines

Intransitionmarketslike

MYandTHconsolidationis

higherrelativetoemerging

Indevelopedmarketsmost

oftheretailvalueattributed

tochainsstores

20%

Indonesia

10%

Vietnam

0%

India

010,00020,00030,00040,00050,00060,00070,00080,00090,000

Source:WorldBank,IQVIAanalysis

GDPpercapita—USD(2022)

ThepenetrationofretailchainsisheavilycorrelatedVietnamhasseenretailpharmacychainsexpanded

withtheeconomicmaturityofacountry(Figure3).Asfromjust3%to15%ofthetotalpharmacyretail

economiesgrow,weexpectchainretailers(includingchannel,atrendthatissettopersistaseconomicand

chainpharmacies)toexpandpenetrationandreachhealthcarefactorsfurtherdevelopthepharmacy

around~80%oftotalvalueatmaturity.industryinthecountry.

EmergingSEAmarketssuchasthePhilippines,Meanwhile,developedeconomiessuchasSingapore,

Indonesia,andVietnamareripeforrapidpenetrationtheUnitedStates,andAustraliaseemostsales

bychainretailers,whileMalaysiaandThailandareoccurringthroughchainsascomparedto

furtheralongthecurve.Forexample,since2021,independentplayers.

5|ScalingforSuccess

Costpressures—Aburdenforindependentpharmacies

Figure4:PercentagechangeinAverage‘Sell-in’price(ASP),from2020to2023(%changefrom2020to2023)

OTC

Rx

+16%

+13%

+13%

+8%+8%

+7%

+6%

+4%

Note:Averagesell-inpricecalculatedthroughweightedaverageof2020salesvolumeandchangeinpricebetween2020and2023

Source:IQVIAMIDAS,QVIAAnalysis

PharmasupplychaindisruptionsduetoCOVIDand

Theincreasedcostburdenwasfeltthemostby

geopoliticaltensionsinrecentyearshaveledtorising

independentpharmacies,whichlackthebenefit

costsforRxandOTCproductsthathavebeenpassed

ofscale.InVietnam,forexample,over12,000

ontoretailersand,subsequently,end-consumers

independentpharmaciesclosedbetween2016and

(Figure4).

2021,representingamorethan20%contraction.

Inrecentyears,theaveragesell-pricechargedtoretail

pharmacieshasincreasedbyupto16%intheOTC

segmentandbyupto13%intheRxcategory.

Duringthesametimeframe,thenumberofchain

pharmacyoutletsgrewbymorethan5x.

|6

Consumerpreference—Shifttowardschainstorescontinues

Figure5:PreferredconsumerchannelsforSEAconsumers(%shareofrespondents)

46%

34%

26%26%

21%21%

8%

6%5%

5%

1%1%

Chain

Drugstores

ePharmacy/

e-Commerce

Independent

Drugstores

Convenience

Stores

Grocery

Stores

Specialty

Healthstore

Jan-June2023Jan-June2022

Source:IQVIAWellTrack

Q12d.Overall,wheredoyoumostprefertopurchaseyourhealthcareproductsand/ormedicines,particularlyfortheupcomingmonthsof2023?

Wecontinuetoobserveagreatershiftinconsumer

optionforconsumptionofhealthcareproducts.

preferencetowardschainpharmaciesin2023

Physicalshopvisitsareanticipatedtocontinueto

comparedwith2022(Figure5).

bemorecommonthanonlinepurchasesinthe

Thegrowingpreferenceforchainscanbeattributed

totrustinproductquality,competitiveprices,anda

differentiatedserviceexperiencecentredaround

theconsumer.

regionfortheforeseeablefuture,giventhehigh

valuethatSEAconsumersplaceonin-person

consultationswithpharmacists.Otherkeybarriers

toincreaseddigitaladoptionincludeconcernsover

productquality,longdeliverytimes,andtheadded

Whilethepreferencefore-channelshascorrected

costsofshipping.

post-pandemic,itremainsthesecondmostpreferred

7|ScalingforSuccess

Largedomesticchainsexpandingcoverage

Figure6

AyalaHealth

pharmacyexpansions

cementleadership

acrossHCvaluechain

BIGPharmacyexecutes

growth-

through-acquisition

planinMalaysia

Filipinoregulatory

probeinto

acquisitionsby

RobinsonRetail

Activity:Acquiredstakeand

expansionplan

Activity:FullacquisitionActivity:Regulatorapproves

acquisition

Date:December2023Date:July2023Date:November2023

RetailPharmacyPlayersRetailPharmacyPlayersRetailPharmacyPlayers

GenerikaDrugstoreSt.josephDrugBigPHARMACYCARINGPHARMACYSouthstardrugRosePHARMACY

750Stores112Stores282Stores199Stores112Stores400Stores

DetailsDetailsDetails

AyalaHealthacquiredastakeinStBIGPharmacybackerCreator,aThePhilippinesCompetitionCommission

JosephDrug,alsoannouncesrapidMalaysianbasedprivateequityfirm,(PCC)initiatedananticompetitivereviewof

expansionplansforGenerikaDrugstoreannouncedacquisitionofCaringforRosePharmacy’sacquisitionbyRobinsonfrom750to1,000storesby2025purchasepriceofRM900M(190MUSD)Retail,theoperatorofSouthStarDrug

beforeokayingthedealinNovember

WhyitMatters

Alongsideaconsumerpharmacy

offering,Ayalahasaportfolioof

pharmaceuticalimporters,distributors,

hospitalsandclinics.Expansionplans

cementpositionasaleaderacrossthe

valuechain

WhyitMatters

ForeignprivateequityfirmsCarlyle

GroupandCVCCapitalPartners

werebothin“advancedstagesof

negotiation,”signalinginterestof

foreigncapitaltoentertheMalaysian

retailpharmacyspace

WhyitMatters

RobinsonRetailcontinuespursuitof

a“multi-formatretailing”giventheir

adjacentownershipofsupermarkets

brands.ThePCCreviewindicatesthat

regulatorsmaybetakingnoteofthe

consolidationtrend

Source:ManilaStandard,InsideRetailAsia,BusinessWorldOnline,IQVIAAnalysis

Inrecentyears,consolidationactivitieshavebeen

InthePhilippinesthe2020acquisitionofRose

observedacrossSEAmarkets(Figure6).

Pharmacyandits400storesbyRobinsonRetail

InthePhilippines,AyalaHealthcareHolding’s(AC

Health)acquiredastakeinStJosephDrugandits112

outletsinDecember2023.ACHealthalreadyowns

thefast-growingGenerikapharmacychain,consisting

sparkedaregulatoryprobethatwasfinallyapprovedin

November2023,aclearindicatorthatthisindustry

consolidationiscontinuingapaceandevensparking

theattentionofthegovernment.

of750stores,ontopoftheirpharmaceuticalimport–MeanwhileinThailand,thetotalnumberofchain

exportbusinessesandarangeofhospitalsandclinicspharmacyoutletswasexpectedtoexceed2,300by

acrossthecountry.early2024representingamorethana15%increase

Creator,theownerofMalaysianBIGPharmacy,

fromthe12monthsprior.

completeditsacquisitionofCaringPharmacyandits

199outletsinJuly2023.Thisstrategicmovewillallow

Creatortosignificantlyincreaseitsmarketpresencein

thecountry.

|8

Newforeignentrants

Therehasmeanwhilebeenanuptickinthenumberof

Aprominentexampleofcross-industrypartnershipis

involvesAlibaba,oneofChina’sleadingtechfirms,

healthcaremergers&acquisitionsacrosstheAsia-Pacific

whichrecentlytookastakeinHasaki,afast-growing

regionmorebroadlyfrom2019to2022,withacquirers

omnichannelpharmacyretailerwith140outletsin

increasinglycomingfromnon-traditionalindustriessuch

Vietnamfocusedonbeautyproducts(Figure7).The

asfinanceandthetraditionalconsumersector.

dealissettoenhancesynergiesbetweene-commerce

giantAlibabaandHasaki’slocalfootprint.

Newentrants,whobringwiththeminnovative

businessmodels,rapidtechnologicaladvancements,

anddifferentiatedserviceofferings,areinducing

consolidationinthesector.

Figure7

AlibabaacquiresstakeinHasaki,entersVietnamcosmetics&pharmacyrace

ActivityCross-sectorequitystake&partnership

DateNovember2023

PlayersinvolvedAlibaba-~$130BRevs(2023)|Hasakiclinic-140stores

Details

ChinesetechgiantAlibabahasacquiredastakeinVietnamesepharmacyandbeautychainHasakiforan

undisclosedamount

WhyitMatters

Hasakihasseenrapidexpansion,growingfromjust14storesin2021to140storesand~750kshoppers

monthlyby2023.Theuniqueoperatingmodelofonline&offlinesalesmeanspartnershipmayprovevaluable

Source:DealStreetAsia,IQVIAanalysis

9|ScalingforSuccess

Conclusion

TheongoingconsolidationofSoutheastAsia’sretailpharmacymarketpresentsamultifacetedlandscapefor

stakeholders.Establishedchainpharmaciescanleveragetheirgrowingscaletofurtheroptimisecoststhrough

bulkpurchasingandstreamlinedoperations.Thisallowsthemtooffercompetitivepricingandpotentiallyexpand

theirserviceofferings,includingspecialisedconsultations,wellnessprogrammes,andmoreconvenientdelivery

options.However,navigatingthisnewlandscapealsopresentschallengesforestablishedchains.Theymust

maintainagilityandadapttochangingconsumerpreferences,whichmightfavournichespecialisationsoramore

personalisedexperience.

Independentpharmaciesfaceamorepressingneedforadaptation.Risingcostsandcompetitionfrom

largerchainsthreatentheirviability.Tosurvive,theycanexploreinnovativebusinessmodels,suchasniche

specialisationinareassuchascompoundingmedicationsorcateringtospecificdemographics.Strategic

partnershipswithotherindependentpharmaciesorhealthcareproviderscouldalsoenhancetheirbargaining

powerandservicescope.Ultimately,thesuccessofindependentpharmacieswillhingeontheirabilityto

differentiatethemselvesthroughpersonalisedcustomerservice,buildingstrongcommunityties,andleveraging

technologytostreamlineoperations.

|10

Abouttheauthors

AKRIMJANTARAPRAPAANTONKIM

AssociatePrincipal,StrategyAssociatePrincipal,Strategy

ConsultingConsulting

AkrimJantaraprapaisAssociateAntonKimisAssociatePrincipalat

PrincipalatIQVIAandisbasedIQVIAandisbasedinSingapore.

inBangkok,Thailand.HeisresponsibleforleadingHeisresponsibleforleadingregionalconsulting

regionalconsultingprojectsatIQVIA,withafocusprojectsatIQVIA,withafocusonmedicaldevices.

onpharmacyretailers.AkrimspecialisesingrowthAntonspecialisesincorporateandgo-to-market

strategy,segmentationandtargeting,categorystrategyandbusinessandoperationaltransformation

management,andoperationalexcellenceforpharmaforpharmaandMedTechclients.Antonbringsover

andpharmacyclients.Akrimbringsinover10yearsof8yearsofmanagementconsultingexperiencefroma

healthcareandstrategyconsultingexperiencefromleadingglobalconsultingfirm.

leadingglobalconsultingfirms.

Ak