Several large players last year announced their intentions to team up with somewhat unlikely partners in an effort to develop new distribution channels targeting the growth presented by Japan’s aging population. And that activity has continued into this year.
Second-ranked convenience store operator Lawson Inc. and fifth-ranked pharmacy chain operator Qol Co. plan to launch outlets this year that offer prescription drugs alongside products typically sold at convenience stores. Lawson will also partner with Japan’s largest drugstore chain operator, Matsumotokiyoshi Holdings Co., to develop so-called "hybrid outlets." Representing very different sectors, these two retailers will set up large-scale retail spaces (two to three times the size of regular convenience stores) to offer over-the-counter drugs and cosmetics, and presumably prescription-filling services as well. The firms hope to have 1,000 "convenience-drugstore hybrids" within five years, on par with Matsumotokiyoshi’s drugstore network.
Japan’s second largest retailer, Aeon Co. – known for its Jusco supermarkets – and trading company Mitsubishi Corp. will collaborate through their respective affiliated drug-related businesses (Growell Holdings Co. and Qol) to create new types of drugstores that cater to customers over the age of 40, offering OTC and prescription drugs, herbal remedies and nursing-care items. The two firms plan to co-develop medical malls as well, locating them in shopping centers to improve accessibility.
Meanwhile, Seven & i Holdings Co. established Seven Health Care Co. jointly with Ain Pharmaciez Inc. – a major chain of prescription drugstores – to develop stores that utilize Ain’s high level of specialization and Seven & i’s strength in retail business infrastructure. It’s first such store (called Seven Bi no Gardens) opened in August 2009 at Seven & i’s Ito-Yokado location in Funabashi, Chiba Prefecture, featuring products related to nursing-care and other items catering to health needs, as well as cosmetics and drugs. Plans call for some 30 openings per year.
Is it any wonder there is so much activity on the distribution front for both non-prescription and prescription drugs?
In addition to coming regulatory changes in the OTC sector in June 2010, there is also the looming demographic phenomenon of Japan’s rapidly aging society, projected to result in nearly one-third of the population being aged over 65 by the year 2025.
OTC drug sales in Japan grew by about 2% in 2008 to be worth $9.4 billion, and the market is forecast to increase by 8% (to $10 billion) in 2013. Pharmacies and drugstores are a leading distribution channel for OTC drugs, and account for approximately 70% of the total value.
Meanwhile, Japan’s pharmaceutical market grew by nearly 3% in 2009, reaching a value of $67 billion, and it is forecast to increase by 11% (to $74 billion) in 2014.
Japan clearly dominates in the Asia-Pacific OTC and pharmaceuticals markets, accounting for 35% and 54% of the respective regional values.
In the U.S., a no-less-pressured pharmacy dispensing industry is also struggling to innovate and change. There, large players such as Walgreen Co., CVS Caremark Corp., Wal-mart Stores Inc., Rite Aid Corp. and other chain operators are hustling to position their pharmacies, walk-in clinics and other health-and-wellness activities as solutions to the nation’s healthcare crisis. We may yet see drive-through pharmacies in Japan!
Debbie Howard is President of Japan Market Resource Network and President Emeritus of the American Chamber of Commerce in Japan.
