Pharma retail went on a break – Newspaper Kommersant No. 152 (7353) dated 08/22/2022
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According to the results of the second quarter of 2022, the number of pharmacies in Russia decreased by 275 points, to 72 thousand. This happened for the first time in almost two years. Previously, pharmaceutical retail was supported by a pandemic, but now business is being pressured by a decrease in effective demand and marketing support for drug manufacturers. The trend to close pharmacies may reach a peak by the end of the year.
As of July 1, 2022, almost 72 thousand pharmacies worked in Russia, which is 4.5% more year-on-year, calculated for Kommersant at RNC Pharma. The growth dynamics could have been higher, but in April-June, 275 pharmacies were closed in the country. According to RNC Pharma, from the third quarter of 2020 until April, the number of pharmacies only grew.
Nikolai Bespalov, Development Director at RNC Pharma, says that it is mostly individual pharmacies or small chains that are leaving the race so far. According to him, the reduction in the number of outlets is associated with a decrease in the solvency of buyers, as well as a change in the policy of pharmaceutical companies regarding the promotion of their products. In addition, some pharmacies closed for renovations or relocations in the summer, when the pharmaceutical retail industry experiences a seasonal decline in demand, he clarifies.
The general director of the Ryazan Apteka Pharma, Alexander Mironov, confirms the trend of leaving the market of small chains and single pharmacies: “In Moscow, where we started opening points, there are many offers for renting premises that were previously occupied by a pharmacy.” Rigla, the leader of pharmaceutical retail in terms of market share, receives purchase offers “regularly”, and in 2022 the network began to pay more attention to this area, said its CEO Alexander Filippov. In April, Rigla acquired the Tula network SPAR-Pharmacy, which includes 34 outlets.
Alexander Mironov believes that drugstore owners are leaving the business amid falling revenues. Small chains have been supported in the past two years by pandemic-related sales, he said. After the rush demand in March, in the first weeks of hostilities in Ukraine, when pharmacy sales grew by 72.5% year-on-year in money terms, the revenue of pharmaceutical retailers began to fall month by month, according to DSM Group data. Year on year in monetary terms, the market kept growing, but in terms of units it decreased by 10% in June.
The departure of small networks has affected the strengthening of market consolidation by federal players. The leader in terms of the number of new points was April, which opened 621 pharmacies in the second quarter, and in general the network reached 4.1 thousand points. As a result, “April” displaced the united network “Erkapharm” (“Ozerki”, “Doctor Stoletov” and “Melody of Health”) to the third position. April is developing in more than 60 regions through organic growth, says Olga Kozlenko, commercial director of the company. In the second quarter, Rigla mainly developed along the same path, Alexander Filippov points out. In April-June, the network expanded by 39 pharmacies, and 49 outlets were closed due to their low efficiency.
Real estate market consultants have not yet noted tangible changes in the demand for rent from the pharmaceutical retail. This segment retains expansion plans, says Boris Matsa, director of retail real estate at Nikoliers. Gorzdrav (Group 36.6), Planet Zdorovya, Neopharm are now developing in Moscow, lists Irina Kozina, director of the street retail direction of Knight Frank Russia.
“Rigla” expects to further increase the number of retail outlets. “April” planned the opening of the 5000th pharmacy by the end of November. But now the market is more likely to experience a lull, since “everything that could happen has already happened,” says the head of the Voronezh “Pharmiya” Roman Kubanev.
Many chains have been optimizing their business for several years in a row, which could be one of the reasons for the reduction of outlets, suggests Irina Kozina. Nikolai Bespalov adds that it is unlikely that major players will manage without reassessing the effectiveness of existing pharmacies. He predicts that this trend will peak by the end of the year and the industry may lose 1-2% of objects.
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