Overview of the Pharmaceutical Retail Chain Market
The pharmaceutical retail market in Vietnam has experienced strong growth, especially since the outbreak of the COVID-19 pandemic. People have become increasingly concerned about their health and are willing to spend more on health-protecting pharmaceuticals. Additionally, the aging population shift has led to a rise in the demand for pharmaceuticals, particularly as old age is often associated with various health issues.
With the steady growth in pharmaceutical demand, pharmacy chains increasingly recognize the potential of distributing these products. In the years ahead, Vietnam's pharmaceutical market is projected to expand further, fueled by rising healthcare awareness among its population. Consequently, the pharmacy chain industry has emerged as a promising investment opportunity.
The attractiveness of this market has been demonstrated by Chris Blank, the founder and former CEO of Pharmacity, 's recent announcement of the opening of a new pharmacy chain named Phượng Hoàng on November 19. Notably, this pharmacy is located directly across from a Long Châu pharmacy, prompting questions about whether this marks the beginning of a new competitive race.
The retail pharmaceutical market is considered "immune" to macroeconomic fluctuations due to consistent demand. Despite the economy experiencing a prolonged downturn, pharmacy chains have continued to grow their revenue year after year. In the post-COVID-19 period, some chains saw a slight decline in revenue, but the overall trend over the past five years has been one of growth.
The Drug Administration of Vietnam (under the Ministry of Health) reports that the Vietnamese pharmaceutical market is currently valued at $7 billion. Other estimates also indicate a similar size, with 70% of the market share attributed to the hospital bidding channel. This means the retail market, with its 60,000 pharmacies, accounts for the remaining $2 billion. Among this, seven modern pharmacy chains, with over 3,000 stores and a total revenue of $1.1 billion, hold more than 50% of the retail pharmaceutical market share across the country. This market is projected to expand to tens of billions of dollars, confirming the sustainable growth potential of the industry.
Pharmacy chains operate through ETC (prescription drugs) and OTC (over-the-counter). The OTC channel is attractive to investors due to its higher profit margins and the absence of prescription requirements, making it more accessible and convenient for consumers.
The race for market share is inevitable
The competition to expand pharmacy systems and dominate the market has become increasingly fierce, supported by the strong financial backing of parent corporations. This support acts as a springboard for chains to consistently broaden their presence. Both domestic and foreign capital are intensifying competition, as everyone recognizes the growth potential of this market.
Currently, the three largest pharmacy chains - Long Châu, An Khang, and Pharmacity - are leading the market. In many residential areas, these chains are located on the same streets or next to each other, highlighting the fierce competition in attracting customers. Pharmacies are sprouting up rapidly, with a high density of stores in both large and small urban areas.
In the quantity competition, quality is key to ensuring long-term sustainability. Unfortunately, despite the direct impact of pharmaceuticals on consumers' health, many violations still occur. More seriously, some pharmacy chains disregard the law and repeatedly violate regulations regarding drug sales. This raises concerns about the consistency of quality across pharmacy systems. Moreover, scaling up requires high-quality resources, yet the pharmaceutical industry is already grappling with a shortage of skilled labor.
Some pharmacy chains have been forced to cut down on branches due to inefficiency. In reality, scaling up does not always yield economic benefits, not to mention the wasted resources that fail to add real value to the business. Despite being backed by large corporations, these chains constantly face pressures to maintain business efficiency and ensure sustainable growth.
Long Châu
According to the Q3/2024 Consolidated Financial Report released by FRT, the FPT Long Châu pharmaceutical chain recorded a cumulative revenue of VND 18,006 billion by the end of Q3/2024, a 62% increase compared to the same period last year. This contributed 63% of the total revenue for the parent company. Long Châu operates a system of over 1,800 pharmacies, with an average income of VND 1.1 billion per pharmacy per month, a significant improvement compared to the end of 2023.
Long Châu, under FPT Retail (FRT), is one of the largest and fastest-growing pharmaceutical retail systems in Vietnam. In 2016, the chain had 185 pharmacies, growing tenfold over the past 8 years. The system currently has more than 1,800 pharmacies and aims to reach 2,500 to 3,000 pharmacies.
Through expanding to all 63 provinces strategy, Long Châu has maintained its leadership in sales. Despite fierce competition, it has secured market dominance by emphasizing branded drugs, prescription medications, and the well-known OTC channel. As a result, Long Châu has become a trusted name in major cities.
Long Châu has also expanded into vaccination services by establishing Long Châu Vaccination Centers, which complement its pharmacy model and optimize operational efficiency. Currently, Long Châu owns 124 vaccination centers across the country. FRT aims to develop FPT Long Châu into a comprehensive healthcare ecosystem. To implement this plan, FRT intends to raise capital by offering up to 10% of Long Châu's shares through a private placement.
Long Châu continues to demonstrate the effectiveness of being a leading pharmacy chain. The year 2023 was exceptional, with revenue increasing by 67% year-on-year, reaching VND 16,000 billion. On average, each pharmacy generated VND 0.9 billion monthly with a system of 1,500 pharmacies by the end of 2023. Despite the overall economic challenges, the chain has continued to thrive. Profit has doubled compared to the previous year, making Long Châu the leader in the industry. This business performance highlights the success of Long Châu’s business model, as the chain remains highly profitable even with increased costs due to branch expansion.
Pharmacity
Pharmacity, once the leading pharmaceutical retail chain in Vietnam, gained prominence for its rapid growth and ambitious goal of reaching 5,000 pharmacies by 2025. However, after rapid expansion, the chain faced challenges in maintaining its top position.
The fast-paced growth led to performance issues, forcing Pharmacity to close underperforming branches, leaving it with 921 pharmacies. The leadership position that Pharmacity once held has now shifted to Long Châu, mainly due to difficulties in adjusting product pricing and ensuring adequate drug supply.
Since 2022, Pharmacity has undergone several changes in its CEO position, which has affected the chain’s strategic direction. To overcome these challenges, Pharmacity has proactively revised its pricing strategy and expanded product offerings, emphasizing improving prescription drug services.
After facing a dual crisis from both the economic environment and internal company issues, Pharmacity experienced another tough financial year. Its revenue dropped by approximately 15% compared to the previous year, primarily due to the closure of nearly 200 stores. Despite cutting inefficient branches, the chain reported a net loss of over VND 900 billion. After two consecutive years of significant losses and frequent leadership changes, the CEO of Pharmacity has reaffirmed the company’s commitment to regaining its market position and winning back customers.
An Khang
An Khang is a pharmacy chain acquired by Thế Giới Di Động in 2017 and fully owned since 2021. Previously, MWG set an ambitious goal of expanding An Khang to 2,000 pharmacies, but this plan has proven difficult as the number of branches has been gradually decreasing. Since early 2024, An Khang has closed 200 branches, leaving only 326 pharmacies, with the chain expected to shrink further to 300 pharmacies. As of the end of Q3/2024, An Khang reported a net loss of VND 320 billion despite adjusting its operational scale.
The location of its stores is not the main reason for An Khang’s weak performance, as An Khang, Long Châu, and Pharmacity are often found on the same street. However, An Khang’s stores have an unoptimized layout and have smaller spaces. Additionally, the product range is less diverse, which makes it harder for customers to prioritize An Khang over the other two chains.
The store closures indicate that An Khang’s business performance remains unsatisfactory. Previously, An Khang’s revenue was modest, but it saw a 43% growth in 2023, reaching VND 2,200 billion. On average, each pharmacy contributed around VND 350 million per month, which, while an improvement, still wasn’t enough for the chain to break even.
Despite revenue growth, profitability remains a challenge for An Khang. Although no new pharmacies were opened, expenditures on upgrading product offerings, branding, inventory, and marketing costs have eroded profits. At the end of 2023, the chain reported a loss of over VND 340 billion. Despite an improvement in revenue, SSI predicts that An Khang will continue to face losses for at least two more years.
MEDiCARE
MEDiCARE is a pharmacy chain that combines pharmaceutical sales with health and beauty cosmetics. This business model helps MEDiCARE diversify its product range and reach a broader customer base, thereby improving the business performance of each branch. Currently, MEDiCARE operates over 140 stores across Vietnam and Myanmar.
At MEDiCARE, pharmaceuticals account for a small proportion of sales compared to cosmetics, meaning most consumers still perceive MEDiCARE more as a cosmetics retailer than a pharmacy. While both the cosmetics and pharmaceutical chains face fierce competition, MEDiCARE has not yet managed to stand out in either field. The expansion of larger competitors poses a significant challenge for MEDiCARE, given its relatively modest scale.
The business performance of the chain is not very positive. Revenue fluctuates between VND 200 and 300 billion and is trending downward. In 2023, the chain generated VND 240 billion, which translates to about VND 1.7 billion per store, despite having prime locations in shopping malls or major streets. The prime locations, however, have not been able to generate sufficient revenue to cover the selling costs, resulting in a loss of more than VND 110 billion for the chain.
Trung Sơn Pharma
Trung Sơn Pharma, established in 1997, is the largest pharmacy chain in the Mekong Delta region. In 2023, Trung Sơn sold a 51% stake to Donghwa Pharma (South Korea) for USD 30 million, valuing the company at VND 1,500 billion.
Since the arrival of the foreign shareholder, Trung Sơn Pharma has expanded to 200 pharmacies, marking an increase of 60 branches, and plans to further scale up to 460 stores in the Mekong Delta and Ho Chi Minh City.
Trung Sơn's business model balances pharmaceuticals and cosmetics. Additionally, Trung Sơn Pharma owns a beauty clinic, a cosmetics center, and an e-commerce platform. This diversification, and its strong presence in the Mekong Delta, have enabled Trung Sơn Pharma to generate revenues in the billion-VND range.
The company's business performance showed good growth in previous years; however, in 2023, its revenue decreased by over 7%, which can be attributed to the broader economic challenges. More notably, net profit plummeted, with the company reporting a loss of nearly VND 60 billion. Trung Sơn likely spent significant capital on expanding new branches and increasing its market coverage. Nonetheless, the financial outlook for Trung Sơn Pharma is expected to improve with the support of its major South Korean shareholders.
Phano Pharmacy
Phano Pharmacy was once considered a potential contender to disrupt the triopoly in the pharmacy chain market after partnering with Masan and integrating it into the Winmart system. However, information about Phano in the media is scarce, and the chain has been inactive in promoting its brand.
The fierce competition highlights the ineffectiveness of Phano's integration into the Winmart supermarket chain. Since the integration pilot began, Phano's revenue has declined, and profitability has seen little improvement. By 2023, the chain's revenue had dropped to just over VND 91 billion. Despite previously claiming to be the highest-revenue pharmacy chain in the market, Phano's business performance now raises questions about the feasibility of integrating pharmacies into supermarkets. After years of recording low profits, the chain unexpectedly reported a loss of more than VND 62 billion in 2023.
ECO Pharma
ECO Pharma is a pharmacy chain with the fewest branches, and it is part of the ecosystem alongside Tâm Anh Hospital and VNVC Vaccination Center. The company primarily distributes pharmaceuticals to hospital pharmacies and retail drugstores nationwide. ECO Pharma mainly imports and distributes products under the ECOGREEN dietary supplement brand, which provides it with a unique competitive advantage.
Although limited product range, the exclusive advantage has allowed ECO Pharma to maintain its revenue position. The company's products are widely advertised, enhancing brand recognition, and credibility and boosting sales.
However, ECO Pharma's revenue has gradually declined. In 2023, the chain recorded a more than 28% decrease compared to the previous year. Frequent advertising costs during prime time have also led to significant expenses for the chain. By the end of 2023, its profit was reduced to just over VND 1 billion, a slight improvement from the previous year, but the net profit margin of 0.1% remains extremely thin.
The competition among pharmacy chains in Vietnam has passed its peak as the key players have gradually been defined. While market share competition still exists, the focus is on boosting individual pharmacy performance, rather than just increasing the number of branches.
Maintaining high standards in product supply and service quality is essential for safeguarding consumer health and fostering customers' trust and loyalty. Adherence to legal regulations governing pharmaceutical sales is particularly vital when pursuing profitability. While profit remains the primary objective, it cannot be realized without securing consumer trust. Consequently, enhancing quality is the most effective strategy for pharmacy chains to promote public health and achieve long-term sustainable growth.
Source: Vietdata's 2023 Pharmaceutical Retail Chains Industry Report