Indicative margin Spread in bracket
Source: Technopak Research

PHARMACY RETAIL IN INDIA

Pharmacy retail comprises primarily of pharmaceutical products, which include OTC and prescription drugs. However, in
addition to selling pharmaceutical products and related services, pharmacy retail stores also sell various FMCG products,
wellness products, consumables and medical devices. As of financial year 2020, the pharmacy retail industry was estimated to
be worth approximately % 1,725 billion, and expected to grow at a CAGR of approximately 10% in the next five years. The
healthy growth witnessed by the Indian pharmacy retail sector over the past few years has primarily been due to an increasing
consumer base and rising healthcare expenditure, the rising demand for OTC and prescription drugs, wellness products and
private label products and the outbreak of the COVID-19 pandemic.

IMPACT OF THE COVID-19 PANDEMIC ON PHARMACY RETAIL IN INDIA

By virtue of being an essential service, pharmacy retail in India has performed better than most other sectors over the last 18
months. The domestic market has recovered from initial loss of business at the onset of lockdowns to achieve growth in financial
year 2021.

As a whole. the COVID-19 pandemic is driving growth in the market segments such as preventive healthcare and personal
hygiene with consumers increasingly likely to purchase preventive healthcare products such as multivitamins and ayurvedic
supplements to boost immunity. Personal hygiene products have also gained prominence.

INTERPLAY BETWEEN PHARMACY RETAIL AND FMCG GOODS

FMCG products play an important role in the overall profitability of a pharmacy retail store, with the sales contribution in a
traditional standalone pharmacy store (also referred to as “unorganized retail”) in the range of 15-20%, and in case of a modern
organized pharmacy store, it can be as high as 30%.

FMCG products essentially contribute to pharmacy stores earning a higher return on capital employed and help drive customer
loyalty by providing customers with a wider array of products to choose from. The major driver for the interplay between
pharmacy retail and FMCG products is that they are products from adjacent categories with good margins, and that customers
have the opportunity to buy essential items in a convenient manner. The table below illustrates the category interplay between
pharmacy retail and FMCG retail with the number of tick marks (“) indicating suitability of the category to pharmacy/FMCG
retail.

 

 

 

 

 

 

 

 

 

 

 

 

 

Category Retailer
Pharmacy Retail FMGG Retail

OTC VVVVV v
Nutraceutical (dietary) VVVVVY VV
Nutraceutical (functional food) VV VV
Baby care VVVVV VVVVV
Feminine hygiene VVVVV VVVVV
Basic personal care VVv VVVVV
Beauty & cosmetic VV VV
Basic Home care v VVVVV
Confectionary v VVVVV
Staples VVVVV

 

 

 

 

Source: Technopak Research

PHARMACY RETAIL CHANNELS
TRADITIONAL CHANNELS

The traditional Indian pharmacy retail segment predominantly consists of retail stores operating as family-run medical stores
with a store size in the range of 150-1000 square feet. As of financial year 2021, there were around 800,000 such pharmacy
stores operating across the country, each facing similar challenges including lack of documentation, managing SKU
proliferation, poor inventory management and inadequate retail environment, non-availability of medicines and in some cases
stocking unreliable medicines.

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