Chemists profit from ageing populace

Japan news October 2017

One retail business that owes its steady growth to Japan’s ageing population is the chemist. The announcement on 7 August that Sapporo-based Tsuruha Holdings, Inc. would acquire the Shizuoka-based Kyorindo Group Holdings, effective 29 September, is seen as a survival strategy to counter the increasingly intensifying competition between the major chemist chains.

The Shukan Jitsuwa of 5 October reports that Tsuruha’s consolidated annual sales of approximately ¥600bn will exceed the figure recorded by Welcia Holdings Co., Ltd.—part of the Aeon Co., Ltd. retail group—moving it to top place.

An industry analyst stated that, while shops will continue to operate under the Kyorindo name, the firm expects to develop new products under a shared brand, as well as integrate procurement and other business activities.

The article notes that the industry leader for 22 years, the Matsumotokiyoshi Co., Ltd. (Matsukiyo) chain based in Chiba Prefecture, fell to 3rd place in 2016. The 0.2% decline in revenues, to ¥577bn, is believed to be due to its giving priority to its retail portfolio through the closing of some 90 outlets, refurbishing another 50 existing shops, and opening 100 new branches.

In 4th and 5th places behind Matsukiyo are Fuchu City-based Sundrug Co., Ltd., with annual revenues of ¥538bn, and Fukuoka-based Cosmos Pharmaceutical Corporation, with 2016 sales of ¥502bn. The current front runners are described using the term gunyu kakkyo, once meaning a rivalry of local warlords, but now used to mean a number of powerful organisations competing in a given field.

Despite only holding the top spot for one year, the article notes that three years ago Welcia’s revenues were only one-third of those in 2016, and that the firm owes its growth to the acquisition of two smaller chains in Kanagawa and Kyoto Prefectures.

“According to the Japan Association of Chain Drug Stores, nationwide sales in 2016 grew 5.9% year on year, to ¥6.49tn”, the industry analyst explained. “Driving growth has been the ageing of the population and the trend to health awareness—through supplements and other means of disease prevention—which have been growing rapidly.

“With the post-World War II baby boomers entering their mid-seventies by around 2025, [chemists’] growth is expected to continue, eventually reaching ¥10tn per year”, he said.

Filling doctor’s prescriptions, which is estimated to contribute to about 15% of chemists’ bottom line, is also viewed as a way to attract customers to purchase other goods, such as food, sanitary products and household items. As opposed to between 60% and 70% of Tsuruha and Welcia outlets boasting licenced pharmacists on the premises, the considerably lower ratio at Matsukiyo, said to be below 20%, is viewed as a key factor in its fall from the top spot.