VietNamNet Bridge – Domestic pharmacy firms, which understand the power of foreign groups, do not intend to confront the big guys, but try to attach niche markets to earn small changes.

The unequal struggle

International pharmacy groups, one after another, have announced their big investment projects in Vietnam.

Sanofi has announced the additional investment of $75 million in its third factory in Vietnam. Rohto-Mentholatum has also increased investment capital from $18 million to $33 million and revealed the plan to build its second factory in Vietnam.

Prior to that, United Pharma committed to make heavier investments in the two operational factories in HCM City and Binh Duong province. Actavis is seeking suitable partners to develop its production and business activities. With the big projects, foreign pharmacy groups seem to follow a plan to turn Vietnam into a big production and consumption center.

According to Actavis, in 2012, the group’s revenue in Vietnam reached $7.2 million, the figure that put the group into the list of top 10 foreign enterprises which provide generic medicine in Vietnam.

Thomas Runkel, Vice President of Actavis Pharmacy Group in charge of North Asia and in Indonesia, estimated that the sales in Vietnam may climb to $5.2 billion by 2015 from the $2.2 billion level in 2012.

Therefore, foreign groups, having realized the great potentials of the market, have been gearing up with their plans to conquer the domestic market.

A senior executive of Imexpharm, a Vietnamese company, admitted that foreigners have advantages over Vietnamese ones. Especially, Vietnamese consumers still prefer foreign brand products to domestic.

Pham Thi Viet Nga, President of Hau Giang Pharmacy JSC, said making specific medicine is one of their biggest advantages. Meanwhile, Vietnamese enterprises can only make popular products.

However, Nga thinks that the biggest challenge for domestic enterprises is the weak distribution network, which makes it impossible to bring medicine products to the remote areas.

It always takes time to register new medicine products in Vietnam. Vietnamese enterprises still have been relying by 90 percent on the material imports, while the material import tariffs are much higher than that in other countries.

Vietnamese going their own ways

According to Chris Freund, Managing Director of Mekong Capital, the company which manages the fund that injected capital in Vietnamese Traphaco, said Traphaco plans to expand its production and distribute its products itself.

Traphaco has joined forces with a Japanese partner to implement a plan to increase the productivity and enlarge the distribution network.

The big domestic pharmacy manufacturer also plans to buy other companies in 2013 to become stronger. Prior to that, it bought 51 percent of Dak Lak Pharmacy’s stakes and 43 percent of Quang Tri Pharmacy’s stakes.

Vietnamese DHG has sold Eugika brand to Wecare, a Thai company. According to MayBank Kim Eng Securities Company (MBKE), DHG’s profit still grew by 18 percent over 2011, though it was nearly impossible for DHG to increase the turnover because its factories have always been running at full capacity.

MBKE has affirmed that DHG has obtained the high growth rate thanks to the sale of Eugika brand.

Domesco, at the shareholders’ meeting stated that it would focus on making herbal medicine, believing that this is a potential market with the increasingly high demand for the medicine products from herbs.

DNSG