Apollo Pharmacy bets on large stores

Apollo Pharmacy bets on large stores The chain plans to experiment with a new format of pharmacy and wellness stores to support future growth Gireesh Babu / Chennai Aug 03, 2012, 00:56 IST

India's largest branded pharmacy retail network, Apollo Pharmacy, is looking at large format pharmacy outlets, which would have an area of 1,500-2,000 sq ft, catering to health, wellness and beauty solutions, apart from medicines.

The large format pharmacy retail model would cater to the wellness market, along with the therapeutic medicine supplies to the patient population. It would look at offering a full range of pharma products, with more space for fast moving consumer goods products, including skin care, cosmetics, beauty and other healthcare related products.

Apollo Pharmacy, which is a division of healthcare major Apollo Hospitals Enterprise Ltd (AHEL), is present both as attached to the hospitals and clinics by AHEL and also as standalone standard format stores across the country. With 1,364 outlets across the country as on March 31, the company is also adding 600-700 new outlets to reach a total of 2,000 outlets in the next three to four years, informed K Padmanabhan, group president, Apollo Hospitals, in a recent conference call with analysts.

The balance sheet of the pharmacy business, which was in positive growth before the aggressive expansion plans started in 2007, slipped into the red two to three years, post-FY2007. After a recent review of its growth strategy, it started closing loss-making stores and opening new stores in the potential areas. It has formats including shop in shop and high street shops apart from the hospital pharmacies, according to a study by Northbridge Capital in 2011.

We think around 5,000 to 10,000 outlets would be a critical mass, but we are aiming at 2,000-plus pharmacy outlets in the next three to four years, Padmanabhan said in a recent concall with analysts. He added that considering that there are around 600,000 pharmacies across the country, aiming at 5,000 pharmacies is not that ambitious. The retail chain has pan-India presence, with around 40 per cent outlets in the National Capital Region and around 60 per cent in South India.

Organised retail pharmacy The Indian pharmaceutical market posted sales of Rs 5,369 crore ($1.01 billion) in March 2012, according to the market research firm of All India Organization of Chemists and Druggists (AIOCD). The pharma retail market in India has around 600,000 to 700,000 outlets across the country. Of this, 95 per cent are in the unorganised sector, in the mom and pop model, as of 2011.

Of the 600,000 retail outlets, 7,000-8,000 would be the total outlets from all the organised retail players. There is plenty of opportunity for the organised players to grow, said Amit Mookim, head, healthcare, with consulting firm, KPMG.

While the total retail pharmacy market has been growing at an average of 18 per cent per annum over the last few years, the organised retail pharmacy segment has been growing at 25 per cent, AHEL said in its annual report of AHEL for the year 2011-12. There are 12-13 players in the organised space of pharmacy outlets, in which 8-10 have between 50 and 200 stores. But barring a few, most of the organised players are not in good shape. At present, a few chains are operationally profitable while many are on the brink being shut down or are up for sale, say experts.

The larger formats should address the needs of the front of the store and hence ideally the non-pharma lines should dominate, says Rahul Chadha, chief executive officer of Religare Wellness, part of the Fortis Healthcare Group, which has around 130 stores in the country, 15-20 per cent of which are large-format stores.

View post:
Apollo Pharmacy bets on large stores