Pharma retailers gear-up for a boom with the opening of the retail sector to FDI, reports N Rao.

The retail revolution sweeping across the country has brought in changes to the way average urban Indians shop for a host of products and services — from routine groceries to attractive apparels, and from petrol and lubricants to books and magazines.

But a majority of Indians still visit the crowded neighbourhood pharmaceutical store to buy a vitamin pill or a painkiller, and in some of the smaller cities have to double-check to ensure that the medicines are according to the doctor's prescription, cosmetics like shampoos and creams are genuine, and the chocolates are not past the 'best before' date.

The $5-billion pharmaceutical retail market in India is, however, priming itself for major changes. Says Viraj Gandhi, CEO, Medicine Shoppe India: "Nine out of 10 blockbuster drugs in the future will be bio-tech based, requiring special storage facilities and transportation. Most of the existing pharmacies in India would be unable to meet the stringent requirements."

Gandhi's firm is the master franchisee in India of US-based Medicine Shoppe International, the largest franchisor of independent community pharmacies in America, and part of Cardinal Health Inc (ranked 16^th on the Fortune 500 list in 2005), with group annual sales topping $75 billion.

Medicine Shoppe set up a presence in India in 1999, but faced stiff opposition from the well-entrenched domestic retailers of pharmaceutical drugs. Five years later, it had appointed 50 franchise stores in the country, and this month has reached the 100 mark.
"From here, we aim to become a 200-plus pharmacy chain by the end of this year, and cross the 700-mark in 2010, by expanding our operations in urban as well as rural India," says Gandhi.

There are over 800,000 chemists in India, dispensing about $5 billion worth of pharmaceutical products every year. International pharmacy chains have still not established a major presence in the country, but with the Indian government eager to open up retailing to foreign direct investment (FDI), many are expected to enter India.

The Indian government recently took tentative steps towards achieving the ultimate goal of allowing 100 per cent FDI in retailing, by permitting single-brand stores to set up shop here. Bruce Burnett, vice-president and international business head, Medicine Shoppe International, believes that over the next five years, "there will be a very strong boom in organised pharmacy retailing, where the pharmacy models will start following the western world."

International pharma retailers are expected to take advantage of the liberalised FDI rules relating to single-brand stores, and enter the country. Organised retailing today accounts for a negligible share of the overall market. But an increasing number of organised players have entered the business of late.

Healthcare giant Apollo Hospitals has established a formidable network of 300 stores under the Apollo Pharmacy brand, but mostly in south India. Another healthcare major, Bangalore-based Himalaya Drugs, is also on a major expansion spree in the retail sector. The herbal healthcare giant, has nearly 100 stores, and is planning an aggressive expansion.

It has just signed up with Reliance Retail – the ambitious retail foray of the Mukesh Ambani controlled Reliance Industries – to set up its Himalaya Herbal Healthcare stores at the new malls, hypermarkets and supermarkets that Reliance plans to set up shortly.

According to Subrata Dutta, business head, consumer division, Himalaya Drug Company, "consumers today are far more discerning. Along with quality products they are also looking for ambience and convenience in shopping. Our outlets have been designed keeping this in mind."

Shoppers at its stores can browse through the vast range of its products at the stores, while executives at the 'information centres,' reply their queries. Importantly, the stores are also electronically linked to a CRM cell, and aided by a team of doctors they are able to answer specific health queries of customers.

Himalaya has tied up with several other retail majors including Big Bazaar, Spencers, Nilgiris, Shoprite, D'Mart, Giant, Vishal Mega Mart, Lifestyle and Big Shopper. It has also gone in for tie-ups with other organised retailers of pharma products, including Apollo Pharmacies, Medicine Shoppe, Pill & Powder, CRS Health, Health & Glow, Guardian Lifecare and Global Healthline, with its chain of '98.4 degrees' stores.

In the north, Guardian Lifecare has set up a chain of about 50 stores, and is one of the fastest growing organised retail chains in the region. Its stores, under the Guardian Pharmacy brand, offers a range of prescription and OTC medicines, food supplements, toiletries, skincare, mother and baby care products, and self-diagnostic equipment.

According to Ashutosh Garg, chairman and managing director, Guardian Pharmacy, the group plans to have 500 stores in just about two years time. The company has also joined hands with the DCM Shriram and set up its 'Aushadhi' chain of rural pharma retail stores.

Garg believes that the initiative would ensure that rural folk, who face the problem of spurious medicines, would get genuine products.

'Aushadhi' outlets are located within the 'Haryali Kisan Bazaars,' the rural initiative of DCM Shriram. Ajay Shriram, managing director of the company, wants to add about 50 more rural utility marts (as the bazaars are known) over the next one year. The company operates 25 such marts mainly in north and central India. It would be investing about Rs75 crore into this business.

Companies like Guardian Lifecare and Medicine Shoppe see huge opportunities in the rural areas, where healthcare facilities are minimal. While the rural poor would obviously go to the public healthcare facilities, the affluent are woefully under serviced at present.

Organised pharmaceutical retailers are also focusing on the higher-end of the urban market. Says Gandhi of Medicine Shoppe, "Most companies today sell super specialty drugs directly as storage conditions, high costs of the drugs and returns policy are big blocks for ordinary retailers. And since these drugs are expensive, there is a high incentive for counterfeiters."

Medicine Shoppe has set up 'super specialty stores,' which acquire specialised products from the manufacturer, transport them to its warehouse in temperature-controlled conditions, and store them at the pharmacies in refrigerators. Importantly, they also ensure free home deliveries to registered patients anywhere in Mumbai.

Medicine Shoppe has also launched a special loyalty card. The smart cards carry details of the customer's medication, and even the patient's medical history can be accessed. The loyalty card also entitles customers to points – 10 points for every Rs100 spent at the
store – and there are prizes, including free holidays abroad.

Guardian too has introduced a programme of privilege cards and vouchers. Others are planning free medical insurance to frequent buyers.

According to Burnett of Medicine Shoppe International, India and China are the two most promising markets for pharmaceutical retailers. "India is a very unique market," he explains. "It has the largest middle income consuming population, many of whom suffer from chronic ailments. Over the next five years as baby boomers start ageing, consumption of chronic as well as preventive medications is going to increase."

Pharma retailers hope to expand their market share significantly, and are going all out to woo this segment of the market.