The retail segment has dominated the growth in Mexico’s OTC market and is expected to continue driving it in the near future. Over the past few years, large pharmacy chains have taken over this market segment. As a result, small independent pharmacies appear to be decreasing. Expanding through powerful franchise models, by eroding the supermarket share proved to be the most successful strategy for the Mexican pharma market.
Total domination by big players
Pharmacy chains continue to be the fastest growing segment in the market. Today, they already represent 65% of the total market share, with the remaining 35% coming from other distributors, such as supermarkets and independent pharmacies.
As experts point out, pharmacy chains continue to grow because of their shifting business model towards convenience stores, similar to US stores, where people can buy a variety of products in one place. In addition to that, loyalty programs and vast distribution channels help to eliminate smaller, less powerful competitors.
Will the online pharmacy business play an active role?
As for the online segment, according to Isaac Valdivieso, the General Director of Farmacia San Pablo, one of the top 5 leading pharmacy chains with an online sales platform, the e-commerce segment in Mexico is too young to give definitive predictions. However, the general consensus seems to suggest that online and offline stores will continue to coexist with each other.
For example, the largest pharmacy chain in Latin America Farmacias Similares completed 2018 with 6,400 stores in Mexico and is projected to reach 7,000 outlets by 2021. The chain uses a pharma strategy of low-price sales for generic brands and products under the “similar” brand. Efficient management of the company’s image through the character of Doctor Simi and agile pricing strategies contribute to the success of the business.
Slow market dynamics in the online segment might be caused by the absence of specific legislations for internet businesses. For this reason, online activities are governed by ordinary law. Thus, one of the market leaders, Farmacias Benavides with 1,145 stores in operation, is not planning to launch an online platform at the moment, limiting their online presence to social media networks such as Facebook, Twitter and Instagram.
Bright future ahead for Mexican OTC & Pharma business
Overall, despite the pharma regulatory issues, the Mexican OTC & Pharma market seems to be one of the most attractive emerging markets in the world. Experts believe that the pharmacy and retail market in Mexico will be adopting a similar business approach as in Europe and the US, where few, big players dominate the entire market and integrate with distributors. Experts assume that in the next few years the Mexican pharmacies’ market will be actively growing and therefore be able to compete against global players.