By Otilia Haraga
Isabelle Iacob, general manager of Help Net Farma SA, says pharma is a tough industry where a business must be ready to “sell by the pill”, bear high operational costs and be prepared for low commercial margins. The doors are practically closed to new players who wish to enter the market without a solid platform. There are plans for the number of Help Net pharma units, which yield most profit in street locations, to reach 120 by 2010. The pharma chain has rolled out a cost-control plan and renegotiated a number of contracts, lowering its rents.
How many HelpNet pharmacies are there at the moment? How many in malls and how many in street locations?
There are 105 pharmacies in the Help Net network at the moment. Twelve percent of our pharmacies operate in commercial centers. We have not tried to set up huge numbers of units in commercial centers because we believe in being close to our patients. We have always supported a long-term, organic and real growth. Having a substantial number of pharmacies that are not financially sustainable and where we cannot maintain a high standard of services seems to us to be the worst choice in terms of business strategy. We have a plan to reach 120 pharmacies by 2010, but this will be done in a healthy way and in tune with the current market conditions. Our development strategy has always taken into account real performance. Of course, there are no certainties when you open a new retail unit, which in time has led to relocations.
How much do you typically pay in rent?
On average, the rent in commercial centers is EUR 29 per sqm. There is no one formula, as there are many factors which determine the cost of rent, such as the specifics of the area, traffic and the type of public. As of this year we have put into practice an efficient plan to reduce costs, of which an important part is the rent in pharmacies. Numerous contracts have been renegotiated and the rents brought down to the current market level.
While before 2008, pharmaceuticals was thought to be a highly profitable activity, over the last year the public perception has radically changed after the financial results of the top players were published. It is clear that if large players with significant experience on the market do not make money, those who enter the market with no solid platform will not have success. Running a pharmacy requires you to get used to selling by the pill. It presupposes financial resources that must support an activity from which payments from the Health Insurance House do not come for months. Last but not least, it needs a system that allows nationwide implementation of a consistent policy in the context in which commercial margins are modest, and operational costs are high, because in the pharmacy we work with qualified personnel with further education, not with normal shop workers.
Where do you register the best sales, in street locations or commercial centers?
Our best sales are in street locations, although there is no recipe for profitability for a pharmacy, because the factors that influence its success are very diverse and dynamic: proximity to busy urban areas and policlinics, the clientele built up over time and the team. This is why one of the basic characteristics of this type of business is flexibility.
How much do cosmetic product sales make up in Help Net pharma units?
A very well-represented category in the Help Net turnover is dermo-cosmetic products, budgeted for this year in excess of 25 percent of the total turnover of over-the-counter (OTC) products. According to sales figures, facial care products (such as Skin Code, Bioderma and Avene) are the most sought after dermo-cosmetic products, followed by hair care and body care products.
We are clearly positioned as a pharmacy chain but our clients have a growing interest in dermo-cosmetic products which, in a pharmacy, also have the supplementary advantage of having been recommended by a specialist. Moreover, the Romanian consumer is becoming increasingly educated and interested in using particular health and beauty products for special needs, rather than mass products.
What range of cosmetics sells the best?
We sell 42 ranges of dermo-cosmetic products and the bestsellers include products from brands such as Foltene, SkinCode, Bioderma, Avene and Vichy. Customers tend to choose the best quality/price ratio and the most popular dermo-cosmetics retail at the average price of RON 60. Buyers of dermo-cosmetic products in pharmacies are very attentive to what they purchase, compared to buyers of cosmetics in supermarkets, who are more influenced by promotions. Dermo-cosmetic sales have increased at Help Net by around 10 percent this year compared to 2008.
How much do natural cosmetics represent in the total cosmetics sales at HelpNet pharmacies?
Natural cosmetic products are still niche products in Romania and represent approximately 2 percent of the total sales of cosmetic products.
Help Net Farma posted in 2008 a turnover of RON 231,816,437 (approximately EUR 63 million) and a profit of RON 3,054,965 (approximately EUR 830,000). This information was taken from the site of the Ministry of Public Finance and confirmed by the company.