Long Chau blows heat on its opponents, An Khang faces major surgery to close more than 200 points of sale, what does Pharmacity do to regain its glory?

During the period 2018-2022, when the Vietnamese market was just exploding with the pharmacy model, Pharmacity always maintained a distance from the pursuing group.

As of May 2019, Pharmacity had 200 pharmacies, more than three times more than Long Chau’s 68 pharmacies and 10 times more than An Khang at the same time. In its heyday – in October 2022, Pharmacity was still the largest pharmacy chain in Vietnam, far ahead of Long Chau and An Khang.

However, the wind reversed in early 2023. By February 2023, Long Chau surpassed Pharmacity in the number of selling points and continued to grow. As for Pharmacity, this chain went through a rough 18 months with two hot seat changes. Meanwhile, An Khang was also forced to “reduce quantity, increase quality” and close ineffective selling points.

How does Long Chau expand so quickly?

In the first 6 months of 2024, FPT Long Chau pharmacy chain revenue recorded 11,521 billion VND, accounting for 63% of FRT revenue. As of June 30, FPT Retail owns a network of 2,435 stores across the country, of which Long Chau has 1,706 pharmacies. In the second quarter of 2024 alone, the company expanded the Long Chau vaccination network with 36 new opening facilities, reaching 87 centers in 40 provinces and cities.

According to the plan, in 2024, FPT Retail will open 400 more pharmacies to increase the total number of Long Chau establishments to 1,900, with the goal of bringing in revenue from 20,000 to 22,000 billion VND.

Talking about the secret to “running fast” but not having to suffer losses, at the 2024 Shareholders’ Meeting, Ms. Nguyen Bach Diep – President of FPT Retail said that the large scale of the chain plus a strong technology system helps a store Long Chau shortens the time to break-even point, increasing sales year by year.

On the other hand, thanks to serious investment in technology systems such as AI, machine learning and big data in the past 3 years, Long Chau has solved the problem of inventory – loss. This is one of the biggest headaches for retail chains – especially the pharmaceutical segment, due to industry characteristics.

According to Long Chau’s leaders, after the chain reached 1,000, the pressure to manage inventory was terrible because of the characteristics of the pharmaceutical industry with a large number of SKUs – several tens of thousands of products with a complex structure of pills in them. box/pill blister/liquid).

“Currently, our technology system has been upgraded to the third generation. Thanks to that, we can provide the list/quantity of drugs to each specific store according to the right type – to the right person – at the right time,” Ms. Nguyen Do Quyen – CEO of FPT Retail said at the Shareholders’ Meeting.

Long Chau is also confident that their advantage of providing enough prescription drugs is difficult for competitors to imitate. Because they have invested in technology to collect prescription information and the latest drugs, updating in almost real-time the constant prescription adjustments of doctors at major hospitals. The largest chain scale in the market also helps Long Chau be favored by pharmaceutical companies in distributing new rare drugs.

Therefore, in the report “Retail Industry – Continuing Recovery”, KB Securities (KBSV) stated that the pharmaceutical retail group with FRT’s Long Chau chain leads the market and continuously expands its market share. . While the remaining competitors An Khang (MWG) and Pharmacity are still struggling to find the breakeven point.

The “major surgery” at An Khang

In contrast to Long Chau’s continuous expansion, An Khang – a pharmacy chain owned by Mobile World – continuously has to close stores to restructure.

An Khang pharmacy chain, formerly Phuc An Khang pharmacy, founded in 2002, was owned by Mobile World at the end of 2021.

In the first half of 2022, An Khang drug chain continuously expanded its scale from 178 to 510 stores. At that time, Mr. Doan Van Hieu Em was confident about the pharmacy chain’s ability to expand, and at the same time, announced the goal of having 800 stores by the end of 2022 and increasing it to 2,000 stores by the end of 2023.

However, by the end of 2023, this goal will fail. By the end of 2023, An Khang will own 527 stores, a number far from the previous target of 2,000 pharmacies.

Also from here, the number of An Khang stores has been continuously reduced. By the end of the second quarter of 2024, the scale of this pharmacy chain will only have 481 establishments. Currently, at the end of the first 8 months of the year, the number of An Khang pharmacies is only 326 points of sale.

“Like its predecessor chains, An Khang is implementing restructuring to review each pharmacy, considering closing stores that are not effective in terms of revenue and profit,” Mr. Doan Van Hieu Em – Member of the Board of Directors of Mobile World Investment Company said at a recent meeting with investors.

The reason for this major surgery partly comes from An Khang’s loss-making business results.

After a year of being invested by MWG, the An Khang pharmacy chain lost nearly 6 billion VND in 2019, continuing to lose 6.4 billion VND in 2020.

The chorus of losses continued in the following years. Most recently, in the first 6 months of this year, An Khang pharmacy chain lost 172 billion VND. Accumulated losses from 2017 to present of the pharmacy chain amounted to 834 billion VND.

Data from MWG’s report also shows that the average revenue of this pharmacy is 500 million VND/store/month. However, according to Mr. Doan Van Hieu Em, to reach the break-even point, each pharmacy needs to achieve a revenue of 550 million VND/month.

“Insufficient revenue to cover expenses” has turned the An Khang pharmacy chain into a burden in the MWG ecosystem, so cuts to restructure are inevitable.

Pharmacity – 18 months of “lost path”, two CEO changes

As for Pharmacity, after being “overtaken” by Long Chau in terms of pharmacy scale in early 2023, this business is still finding its glory. After the upheaval at the top in September 2022 when founder Chris Blank left the position of general director and legal representative, Pharmacity changed the CEO position twice within 18 months.

Before 2023, despite having the largest number of pharmacies in the retail industry, Pharmacity is still having difficulty finding a break-even point and making a profit.

In 2019, Pharmacity recorded a net loss of VND 265 billion. In the first half of 2020, Pharmacity’s net loss after tax was more than 194 billion VND, an increase of 60% over the same period last year; At the end of 2020, this series recorded a negative value of VND 421 billion, the accumulated loss by the end of 2020 reached more than VND 1,000 billion. Up to now, Pharmacity is still having to deal with this accumulated loss.

Compared to competitor Long Chau, Pharmacity operates with a completely different model – convenient pharmacy. Therefore, in addition to selling medicine, stores also sell many cosmetics, confectionery, soft drinks and some other consumer goods.

SSI Research estimates that the proportion of non-medicinal products in Pharmacity accounts for more than 70%. The CEO of this chain admitted that many customers think they are a convenient pharmacy but lack prescription drugs.

But at the present time, the new CEO of Pharmacity said that he will no longer pursue the “convenient pharmacy” model, but become a supplier of drugs for all disease groups.

This business changed its direction to the “enough medicine” model like Long Chau used to do. Pharmacity aims to focus on adding a full range of medicines to meet all hospital prescriptions.

Regarding selling price, Mr. Madan said, Pharmacity has adjusted its selling price policy and changed its operating thinking. Currently, the pharmacy offers many products at many different prices, of which more than 1,000 drug items have reduced prices.

“Pharmacity has new competitive prices that few pharmacies can offer” Pharmacity CEO affirmed.

According to Mr. Madan, Pharmacity’s strategy in the coming time is not aimed at competing according to the cheapest price model. Instead, Pharmacity focuses on providing genuine, high-quality products at reasonable prices.

This is evidenced by Pharmacity’s closed pharmacy design. This pharmacy model allows drugs to be stored at appropriate temperatures according to GPP standards, ensuring optimal quality of drugs and other products.

Although Pharmacity is gradually reforming its apparatus, Pharmacity’s business efficiency and profitability are still a mystery.

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