China Pharmacy Journal recently released its rankings of the leading 100 Chinese retail pharmacy chains in 2007, and the followings are the leading ten chains by various parameters:

Leading Ten Chinese Retail Pharmacy Chains in 2007 by Sales   Unit: CNY mln

Source: China Pharmacy Journal

Leading Ten Chinese Retail Pharmacy Chains in 2007 by Directly-Operated Stores

Source: China Pharmacy Journal

Sales growth slows while consolidations increased slightly

According to China Pharmacy Journal, total sales of the leading 100 Chinese retail pharmacy chains rose 6.62% in 2007 reaching CNY 43,915 million. Two of the largest pharmacy chains in China, Hunan Laobaixing Pharmacy and Jiangxi Kaixinren Pharmacy, did not participate in the ranking due to their ongoing fund raising activities. If these two companies were included, the total sales by the leading 100 is estimated to be more than CNY 47 billion, up at least 15%.

However, the growth rate of retail pharmacy sales by the leading 100 in 2007 is much lower than that of the previous four years, an indicator of slower growth of the retail pharmacy sector last year.

If sales of Hunan Laobaixing Pharmacy and Jiangxi Kaixinren Pharmacy were included, it is expected that the leading 100 will account for 38.5% of the total Chinese retail pharmacy sales in 2007, up from 37.3% in the previous year, showing slowly increasing consolidation in the Chinese retail pharmacy sector.

Franchise model out of favor

For the leading ten pharmacy chains by number of directly-operated stores, the number of their directly-operated stores jumped 41.0% in 2007, while that of their franchised stores increased only 4.2%. Some of the leading retail pharmacy chains, such as SinoPharm Guoda Pharmacy, disposed all their franchised stores in 2007.  

Expansion by adding directly-operated stores required higher investment, stronger distribution capabilities and more management input. As a result, the leading 100’s total number of retail pharmacy stores increased only 7.0% in 2007, compared with 7.5% in 2006 and 38.7% in 2005. 

Top 10 delivers higher growth

Compared with the leading 100, which saw 6.6% and 7.0% growth in sales and the total number of stores respectively in 2007, the top ten Chinese retail pharmacies grow 19.0% in sales and 11.6% in its total number of stores. In addition, 11 retail pharmacies have been in the top 20 for the past four years consecutively.

Profitability improves for the leading 100

The average profit margin of the leading 100 Chinese retail pharmacy chains was 3.0% in 2007, up from 1.9% in 2006. Their total profits grew 56.2% last year, far exceeding their sales growth of 6.6%. 29% of the leading 100 retail pharmacy chains had net profitability above 5%, nearly 10% of them had net profitability between 3% and 5%, and 17.8% of them had net profitability below 1%.

Rising new stars

A rising star in 2007 was Guangdong Dasenlin Pharmacy which showed strong growth in the past two years, rising from No. 28 in 2004 and 2005 (by sales) to No. 17 in 2006 and No.8 in 2007. Its total number of stores jumped 43% while its sales almost doubled from CNY 700 million in 2006 to CNY 1,380 million in 2007.

Another star in 2007 was China NepStar which successfully launched IPO at NYSE in 2007. While the company expanded the number of its stores by 33% last year, its sales grew only 5.5%.

Both companies declined to supply their profitability data to China Pharmacy Journal.