competitors due to better product discovery and store staff led education. The key factors driving growth in this
segment are unhealthy consumer lifestyles, rise in non-communicable diseases, impact of COVID-19, an increase
in consumer awareness, urbanization and growing income levels, informed sales staff and the growth of modern
pharmacy retail.

. Cross-selling with FMCG products with good margins: FMCG products account for approximately 15-20%
of the overall revenue of organised pharmaceutical stores. The table below sets forth the share of sales of food
and non-food FMCG products through FMCG grocery stores and pharmacy retail stores:

 

 

 

 

 

 

 

 

 

 

CAGR
Market Size (INR Share of Sales from
Crore) — FY 2020 (FY 2020-2025) Pharmacy Formats
Functional Food & Beverages 21,750 19% 15%
Dietary Supplements 31,500 20% 65%
Personal care & Home Hygiene 1,38,800 7% 4%
Sources: Secondary research, Primary Interviews
Note: 1 crore = 10 million
€ Emergence of self-diagnostic devices: Manufacturers of health-tech devices that allow users to self-diagnose

ailments and monitor health risks have witnessed a surge in sales growth, further buoyed by the impact of the
COVID-19 pandemic. While blood pressure monitors, diabetes kits, weighing machines, thermometers have
traditionally formed bulk of the demand, the COVID-19 pandemic has caused a spike in demand for oximeters
and pulse monitors. Modern pharmacy chains have benefitted from this recent emergence, due to 1) better
availability of such products, and 2) suitability of such products, which generally have high brand agnosticism, to
selling via private labels .

. Loyalty programs aid customer retention: Established market players such as Apollo and the MedPlus have
developed customer loyalty platforms that enable greater customer acquisition and improved customer retention
through the utilisation of advanced data analytics, the ability to offer discounts and leveraging loyalty driven
behaviour to up-sell and cross-sell.

. Ecosystem Play: Besides dispensing pharmaceutical and FMCG products, modern pharmacies are now building
up a complete ecosystem of related services in order to acquire customers. They have augmented their proposition
by offering a wide range of value-added services like appointments for doctors, online consultation, health blogs,
medicine reminders & refills alerts, tie ups with diagnostic centres.

. Increase focus on private label products to drive higher margins: Private labels in pharma and wellness
retailing is expected to grow at 36% CAGR between financial year 2020 and financial year 2025, thereby
increasing its share from 8% of the industry in financial year 2020 to 12% by financial year 2025. The share of
private brands in retail sales is close to 20 to 24% across big retailers such as CVS Pharmacy, Walgreen Boots,
Rite Aid in USA. Private label products across prescription drugs, OTC, Wellness consumables, Devices and
consumables, consumer food and non-food, yield higher margins for retailers (for example 48-67% for private
label prescription drugs vs 28-37% for branded prescription drugs) and are typically priced lower than established
brands and focused on building customer loyalty. Private label products are now common not only in fast-moving
brand agnostic categories but also other categories such as prescription drugs and personal care. Industry leaders
have a clear lead over their smaller competitors with higher requirement of private label in each category thereby
enabling them to meet the Minimum Order Quantity (MOQ) of the contract manufacturers.

COMPETITIVE BENCHMARKING — PHARMACY RETAIL MARKET

INDICATIVE COMPARISON OF UNIT ECONOMICS OF ORGANIZED PHARMACY RETAIL CHAINS AND
UNORGANIZED PHARMACY STORES

 

 

 

 

 

 

Heads (Share of Net Sales) Pharmacy led Retail Chains Independent Pharmacy
Store Size (in sq. ft.) 200-700+ 150-500+
Average sales /Day™ (in %) 30,000-50,000 4-6,000
SKUs 4,000-10,000 2,000-6,000
COGS 78-83% 86-88%

 

 

 

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