A pharmacy’s brand

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Pharmacies, like any other retail industry in Malaysia, are heavily dependent on marketing and advertising to attract new customers and retain old ones.

Indeed, the game of branding stands crucial in this niche industry as pharmacies position themselves to match consumers’ value propositions and at the same time meet with healthcare demands.

A listed pharmacy chain’s success strongly hinges on its ability to establish effective advertising, marketing and promotional programs to drive demand for its products.

Take Caring Pharmacy, for example, which is the latest pharmacy to list on Bursa Malaysia. In its prospectus launch, the group affirmed that advertisements are designed to promote its brand, its corporate image and the price of products amongst consumers here.

“Our pricing strategies and value proposition must be appropriate for our customers. If we are unable to maintain and increase the awareness of our brand, products and services, we may not be able to attract and retain our customers,” it said in the report.

While acknowledging that the community pharmacy industry in Malaysia is subject to changing customer preferences, Caring said its success depends on its ability to anticipate and identify customer needs or preferences, and adapt its product selection to match up.

“Failure to do so could result in a negative impact towards business, it highlighted. “Pharmacies also need to identify the ‘current’ trends, among others, in health supplements, personal care products, as well as other needs to reflect customer preference at any given time.”

Meanwhile, another pharmaceutical company listed on Bursa Malaysia, Apex Healthcare Bhd (Apex) in its Annual Report last year said the foundations of the industry remain unchanged such as demand for greater value in generic drugs, patent expiration of innovator drugs, increasing life expectancy translating into increased demand for healthcare products and services that enhances lives and restores health.

Continuing Malaysian government support for the healthcare sector, a National Key Economic Area (NKEA) under the Economic Transformation Programme (ETP), also strengthens prospects, it said.

“Prospects for the pharmaceutical industry remain good with a forecast compounded annual growth rate of 9.5 per cent for the period 2009 to 2014.

“Notwithstanding global and domestic challenges and uncertainties, the fundamentals of our core business remain good. Apex is well placed for steady growth, but only if we continually sharpen our strategies, invest in our people and succession planning in order to stay the course in delivering improved competitive products, higher customer satisfaction and an ever growing base of customers both domestically and internationally.”

 

Eye on Caring Pharmacy 

As one of the recently listed pharmacies, all eyes are on the group to see how it would fare on the bourse.

Its latest results announced on July 30, 2014 saw revenue of RM81.97 million and profit before tax of RM9.11 million for the current financial quarter.

For the nine-month period ended February 28, 2014, the group achieved revenue of RM249.7 million and profit before tax of RM19.94 million.

During the quarter under review, Caring Pharmacy established an additional five new outlets comprising two shopping complex outlets, one street outlet and two specialised retail outlets.

Hong Leong Investment Bank Bhd’s research division (HLIB REsearch) in a note on August 15 following a corporate visit said it was neutral with negative bias on near-term prospects of the company.

“We opine that there might be some downside risks on its store expansion plan and profit margin. Our concern arises due to the disappointing results which, from our understanding, was caused by, overaggressive outlet expansion, aggressive pricing to attract market share, and a longer-than-expected gestation period.”

Notwithstanding this, though, HLIB Research maintained its hold call on this stock on a few good pointers.

“Management is not aware of the areas overlooked, and has exercised more careful discretion in the location of the outlet in the future,” it detailled. “Caring will be targetting less saturated areas, such as Melaka, Penang and Ipoh, instead of crowded and competitive Klang Valley area.”

On its last view, HLIB Research reiterated its hold call on Caring Pharmacy.

Consistency seen in Apex Healthcare’s results 

Apex’s 1H14 results released on August 20 were in line with analysts’ expectations such as RHB Research Institute Sdn Bhd (RHB Research), with its RM17 million net profit accounting for about 49 per cent of the research house’s FY14 full-year target.

On a yearly basis, 1HFY14 revenue rose 20 per cent y-o-y to RM253.4 million while net profit was up seven per cent year on year. By segment, its manufacturing and marketing segment has performed well, contributing RM16 million in revenue (51 per cent y-o-y) to total sales.

Its wholesale and distribution segment contributed RM233.6 million. Overall, the better performance was underpinned by stronger sales from both the private and government sectors in Malaysia and Singapore as well as better contributions from its new distribution warehouse in Singapore.

Nevertheless, its earnings before interest and tax (EBIT) margin fell to 8.9 per cent in 1HFY14 from 10.4 per cent in 1HFY13 due to higher operating costs.

On a quarterly basis, its numbers were generally softer in 2Q14, as the company booked revenue of RM122.5 million and a net profit of RM6.2 million in the period.

The lower results were attributed to a different sales mix that stemmed from lower-margin distribution agencies during the quarter under review.

“The company’s core businesses continued to do well, supported by continuous efforts and commitments in product development, brand management and operational efficiency.

“Apex’s venture into manufacturing orthopaedic devices is progressing steadily – the company is trying to get more business on top of its existing contracts.

“We saw three consecutive quarters of small positive contributions since 4Q13, following the commencement of its operation in October last year. Meanwhile, the distribution warehouse in Singapore that the company acquired last year is providing more storage capacity to accommodate growth.”

In the period, Apex’s management proposed a first interim single-tier dividend of 3.5 sen to reward its shareholders.

“We believe that the company should continue to grow organically while it aims to record more meaningful contributions from its orthopaedic business going forward. We maintain our FY14 forecast and introducing our numbers for FY15.

“We also roll over our valuation period to FY15, while our higher fair value of RM3.75 from RM3.54 is pegged to an unchanged target 12x FY15F P/E. Its balance sheet remains strong, with total net cash of  RM47.9 million as at end-June 2014.”

Community pharmacies in and about Kuching

The community pharmacy industry in Malaysia is subject to normal competition, with key competitors being chain community pharmacy outlets and independent ones.

Competition also comes in the form of hypermarkets, supermarkets, convenience stores, specialised health food stores, supplement shops and even Chinese medicinal halls that carry similar ranges of non-scheduled drug-related products. This does not take into account healthcare institutions such as private hospitals with their in-house dispensary.

Also, according to the Economic Report 2013/14 issued by the Minister of Finance, Malaysia’s gross domestic product is forecast to grow five to 5.5 per cent this year which is in line with the forecast growth of 5.9 per cent in wholesale and retail trade sub-sector.

On the other hand, the fourth quarter 2013 consumer sentiment index has fallen below the 100-point threshold to 82.4 points for the first time in almost five years following inflationary pressure as consumers becoming increasingly cautious with their spending.

All these heighten the need for pharmacies to stay on their A game. As such, pharmacies tend to take store location, merchandise selection as well as pricing and services as key denominators to stand out from the others.

BizHive Weekly talks to three local pharmacies in different vicinities around Kuching and identify their take on branding motives.

SHiNE Pharmacy: The Australian touch

The business of pharmacies is one that is specific and fulfills a void in the retail market for quality products.

Although supermarkets and sundry shops carry certain types of medicine and healthcare products, these are generally generic and easily available.

Many entrepreneurs saw the need to fulfill niche segments, such as exclusively available and premium pruducts.

This was where Charles Liew and Christina Wong came in with SHiNE Pharmacy established in 2012, branding themselves as the local ‘Australian pharmacy’.

“The idea came to me when I first came back from Australia, in 2011.

“Having spent 10 years there, I noticed some key differences between the healthcare systems in Australia and Malaysia, more particularly Kuching, being slower in development as compared our Peninsular Malaysian counterparts.

“There was definitely room for improvement in Kuching, for the citizens of Kuching to enjoy better accessibility to world-class healthcare without incurring any further costs.

“My partner, Christina, was working at the Sarawak General Hospital at the time. I told her there was a void in the market for a pharmacy with an Australian heartbeat and that we could, with our respective backgrounds, bring a real, tangible difference to Kuching.”

The duo imports quality Australian retail brands for sale in a move to brand themselves with said quality.

When asked what he thought about the need for medical attention in the city, Liew said, “There is indeed a great need, especially with the very visible increase in Kuching’s population.

“In saying that, there is no shortage of clinics, hospitals and pharmacies in and around Kuching. For example, in and around Kuching, there are five medical centres: Sarawak General Hospital, Timberland Medical Centre, Normah Medical Centre, KPJ Kuching Specialist Centre and Borneo Medical Centre.

“We also see clinics and pharmacies opening left, right and centre. As such, it is no issue for someone in need for medical attention to actually get medical attention very quickly, especially in the Kuching area.

“The problem, though, is that due to the many choices at the person’s disposal, his/her choice of one place would mean the snubbing of a whole host of others.

“That causes inevitably one thing: competition. When medical providers start to compete, there is a risk that the focus may be more on money rather than service. This is an area that SHiNE Pharmacy is very much aware of, and we have identified this area to be an area of greatest need.

“We have positioned ourselves to always focus on one thing: customer service.”

Part of the services rendered to the public includes education, and under this cap, Liew and Wong take to conduct health screenings on a regular basis with its business partners as well as the Ministry of Health to help cultivate awareness among consumers.

In tune with SHiNE Pharmacy’s priority to render worldclass service to its customers, Liew said, “We appreciate the tremendous effort by the Ministry of Health as well as our peers within the healthcare industry to make healthcare more accessible and affordable.

“At SHiNE Pharmacy, we have chosen to mirror ourselves with the Australian standards of healthcare.

“This is reflected in us making sure that every single customer gets to speak to our pharmacist, and that no matter how long it takes to explain, we will take the time to make sure you understand your medicines and supplements. A lot of our customers have shown their appreciation in this regard.”

In addition, Liew said they have drawn from their Australian experience by giving SHiNE Pharmacy the Australian vibe.

This is done via an extensive range of worldclass Australian products – which Liew adds isn’t available anywhere else in town – alongside other supplements commonly available elsewhere in Kuching.

“Along with our various promotions celebrating Malaysian festivals, SHiNE Pharmacy also runs promotions based on the Australian uniqueness.

“For example, we ran offers during Australia Day and we celebrated Australia’s participation at the FIFA World Cup by running a month-long promotion on all Australian products.”

Damai Pharmacy: Serving the needs of rural areas

Pharmacist Kui Ming Sing saw the need for more pharmacies in the Gita vicinity, which led her to opening up Damai Pharmacy at Choice Supermall in Matang.

“That time, I think Choice Mall had a supermarket at Satok, and they put up an advertisement looking for people to join them to open up a pharmacy at this mall, so me and my partner – we actually had another pharmacy at Tabuan Jaya – thought of venturing out into another branch. We applied for it and we got it.

“A that time, there was only one pharmacy at Kampung Gita,” she told BizHive Weekly, affirming the need to address the lack of access to pharmacies here.

“In this area, most people walk in looking for cold and flu medications. There are also many diabetic patients, gout, asmathic and those with arthritis.”

Kui confirmed a greater need for more pharmacies in rural areas.

“We give a lot of advise on their medication. Some of them, because they live in rural areas, they lack access to proper medical facilties in case of emergencies and end up coming to us for solutions.

“An interesting case to note is that many times, their friends or families – if they have good medication, they will advise them to get it but often they purchase it for the wrong conditions. We managed to intercept many such cases in this point.

“For example, there was once whereby a neighbour recommended a cream to aid a small child but the cream – which was a controlled substance – was only meant for adult use only.

“This is very common. Cases like steriods, many of my patients are arthiritis, gout and asmathic patients, so when they have very bad inflammation, the doctors will give them medication for emergency cases to control the condition and to put them back on track.

“However, these patients end up coming to us pharmacies in search for these medication again, believing they need it on a prolonged basis in order to get better, which is not the case.”

The problem, the pharmacist said, is that doctors sometimes prescribe these medication without fully explaining what it is used for, how it is to be used and how long it should be used for.

“They were often only made to understand that the medication will help with relieving the pain.

“And when it is finished, they will go and search for the medication even when they don’t need it. We often find these kind of cases happening. I try to educate them on the actuality of the situation.”

When asked on her thoughts on competition, Kui affirmed that it was increasing in this area via the entry of three new pharmacies over at eMart.

Trinity Pharmacy: Leading in Lundu

All the way in Lundu, entrepreneur Chieng Ming Kai of Trinity Pharmacy in Lundu Bazaar is tapping the needs of people in rural areas there.

He told BizHive Weekly his personal view whereby many in rural places still look for approachable health professionals and easily accessible medical supplies.

“As a pharmacist, we have met the people’s needs by seeing them face-to-face daily and we don’t charge by giving away the counselling and professional advices,” he detailled. “What’s more, people can walk in any time, without long waiting time and get their medicines with proper counselling and instructions.”

This was part of the reason why Chieng opened up this pharmacy, apart from family commitment.

“My wife and I want to stay back in Lundu while we still can see each other after work. My wife is a pharmacist too.

“She was transferred to Hospital Lundu. Back then, I moved to Kuching and found a job in a chain pharmacy outlet.

“By opening up my own pharmacy, I don’t have to travel much and it is quite exhausting driving one and half hour from Kuching to Lundu. The pharmacy started on Nov 26, 2012 after nearly three months of preparation.”

During his course of work, Chieng detailled encounters with several issues caused by the lack of proper education and awareness.Counterfeit medicines and unregistered traditional medicines or herbal products from unknown resources are rampant in small towns,” he observed. “We have tried our best to explain those products are not safe and may cause certain harms to the body health in long term consumption.”

The second challenge, he said, was that older generations were still reluctant to seek proper medical attention in serious situations.

“Nevertheless, we always refer them to local clinics, hospital and specialists in Kuching whenever it is beyond our abilities and knowledge for a correct diagnosis and medical judgement.”

Despite this, Chieng affirmed that the society is slowly coming to terms with the need to better care for themselves, stating that people are getting more concern about their health these days and that happens to the rural areas.

“For example, I have customers who always told me, their sons or daughters bought these and that vitamins and health products from Kuching or KL and they will pop in our pharmacy seeking the same items.

“So, it is a good circle to the business as well as it brings more awareness to the older generations to buy suitable health supplements from pharmacy.”

Trinity Pharmacy stands to brand itself from competitors by utilising the colour red to attract consumers.

Additionally, he both trains and practices friendliness among his staff who always open the door for customers.

“Well, we make sure that our customers are served genuinely and our service is efficient,” he said happily.

When asked if he saw increasing competition amongst community pharmacies in Lundu, he quipped, “Definitely. Lundu and Kuching is not a far distance by driving. People can seek for more varieties with cheaper options in Kuching.”

His advice to readers is to meet and trust your own pharmacist whom you regularly go to.

“They are expert in drugs and they provide you the best info about your medicines.”