James Dudley Management

James Dudley Management

Good reasons for Health and Beauty Suppliers and Pharmacists to work together to Diversify Pharmacy Businesses in Europe – Says Report

With nearly 70 percent of turnover tied into price regulated prescription business there are good reasons for health and beauty suppliers and pharmacists to work together to help diversify pharmacy sales in Europe into non-pharmaceutical health and personal care related categories and OTC self-medication.

The average pharmacy in Europe has a sales turnover of €1.158 million of which 69 percent of is based on dispensing prescriptions most of which are reimbursed and hence price regulated. OTC self-medication represents around 12 percent of turnover, while parapharmacy, medical aids and other health and beauty categories make up nearly a fifth of pharmacy sales. So says a major new market report covering over 208,750 pharmacies in 22 European countries by one of Europe’s leading consumer healthcare marketing experts, James Dudley.

The report “OTC Distribution in Europe the 2014 edition” was published in the spring of 2014 by James Dudley Management and is the ninth edition of an important consumer healthcare industry study running since 1992.

Figure 1: Average Percent Share of Pharmacy Sales Turnover by Category – 22 European Markets

Average Percent Share of Pharmacy Sales Turnover by Category

James Dudley Management – OTC Distribution in Europe 2014 edition

Pharmaceutical dispensing of prescription drugs represent 80 percent and more of pharmacy sales turnover in three of Europe’s largest pharmacy markets France, Germany and Spain along with the Netherlands. The price regulated nature of prescription business along with Government control of dispensing fees limits the maximisation of profitability and this is certainly the case in Germany where a third of pharmacies complain that their future viability is threatened. While this level of commercial dependency on prescription business is probably acceptable in Slovenia where the majority of pharmacies are Stateowned, diversification into non-price regulated categories is probably needed in advanced capitalist economies for businesses to thrive and grow.

In Europe’s largest pharmaceutical market, Germany the share of turnover represented by pharmacy only OTC medicines for example is down to less than 8 percent. This represents a worrying downward trend and is considerably lower than the 12.9 percent of turnover achieved in 2005. While this fall in share is partially due to competition from ‘free sale’ medicines through druggist channels, internet and mail order pharmacy represents some 12 percent of OTC self-medication market share in Germany according to the Dudley report.

Also in Germany supplementary ranges, which now include OTC companion animal medicines, have grown from 3.4 percent share to 5.4 percent since 2005. The share taken by nursing aids declined from 5.7 percent in 2008 to 4 percent and this in part reflects changes in the reimbursement system for some homecare products particularly from the largest statutory health insurer AOK.

In France, the average pharmacy has a turnover of €1.94 million. Pharmacy retailers are highly dependent on prescriptions as represent about 82 percent of pharmacy turnover. 7 percent of retail pharmacy turnover stems from OTC medicine sales and 5 percent from cosmetics and personal care. A further 2 percent of turnover stems from other parapharmacy items and companion animal health products.

By contrast less than two thirds of pharmacy turnover is represented by business dependent on State reimbursement in Switzerland, Romania and Norway. In each of these pharmacy retail markets non-pharmacy lines especially beauty and personal care represent between a fifth and a quarter of pharmacy sales.

In Poland prescription only medicines represent some 63 percent of pharmacy turnover. However, this is split 45 percent for reimbursed medicines and 18 percent for prescription medicines which are not reimbursed. OTC medicines represent about a quarter of pharmacy turnover in Poland.

Many pharmacies are deterred from diversification because of competition from mass market outlets in terms of high penetration brands, low prices, wide ranges and shopping convenience.

However, pharmacies can exploit their position as healthcare service providers to take share of personal care categories with clear health benefits and where pharmacist advice makes their service unique.

For example the main channels for general cosmetics in Poland are chains of cosmetic shops which have 41 percent market share, these are followed by hypermarkets with 15 percent share. Pharmacies have a small share of the Polish cosmetic market but own the specialized niche of dermo-cosmetics which represent some 4 percent of pharmacy turnover. Sales of dermo-cosmetics have grown rapidly in recent years in Polish pharmacies and are favoured by pharmacists for the high margins they generate.

Figure 2: Share of Pharmacy Sales Turnover by Category – 22 European Markets

Country Prescription Business OTC Self medication Other Health & Beauty Total
Austria 72.7 13.0 14.3 100.0
Belgium 68.0 9.7 22.3 100.0
Bulgaria 44.0 15.5 40.5 100.0
Czech 70.0 19.4 10.6 100.0
Denmark 77.0 8.0 15.0 100.0
Finland 79.0 14.0 7.0 100.0
France 82.0 7.0 11.0 100.0
Germany 82.0 8.5 9.5 100.0
Hungary 70.0 15.0 15.0 100.0
Italy 71.0 9.0 20.0 100.0
Netherlands 82.6 1.4 16.0 100.0
Norway 60.0 15.0 25.0 100.0
Poland 62.9 25.0 12.1 100.0
Romania 62.0 14.0 24.0 100.0
Russia 48.0 33.0 19.0 100.0
Slovakia 70.0 15.3 14.7 100.0
Slovenia 80.0 8.0 12.0 100.0
Spain 80.2 6.0 13.8 100.0
Sweden 76.9 10.5 12.6 100.0
Switzerland 65.0 16.0 19.0 100.0
Ukraine 40.0 32.2 27.8 100.0
UK 50.0 5.0 45.0 100.0
Average 22 Countries under Study 68.5 12.3 19.2 100.0

James Dudley Management – OTC Distribution in Europe 2014 edition

Prescription medicines and National Health Service contracts represent just 50 percent of pharmacy turnover in the United Kingdom. This figure is however highly skewed by Britain’s largest pharmacy chain Boots the chemist which represents a fifth of pharmacy turnover in the United Kingdom. Only 35.6 percent of Boots the Chemist turnover is derived from dispensing and related income. Retail sales account for 64.4 percent of store turnover of which over half is for beauty and toiletry products. 14.6 percent of Boots the Chemist turnover is from consumer healthcare including OTC medicines. Beauty and Toiletries which include cosmetics and fragrances, accessories and toiletries represent 35 percent of retail turnover. Lifestyle which is made up of baby products, nutrition, photography, electrical, seasonal and other lifestyle sub categories accounts for 14.8 percent of turnover.

While pharmacies in Romania try to avoid direct competition with supermarkets they have grabbed niche segments in categories such as hygiene and personal care, which are at the upper end of the mass market or premium priced. These they differentiate through the emphasis on the products' healthcare attributes. Hygiene and personal care represent about 1 percent of turnover. Pharmacies account for some 6 percent of national sales of the hygiene and personal care market in Romania.

Sales of non-medicinal products are important especially for chains as they provide many times the gross margin of pharmaceuticals. For example in Sensiblu, Romania’s largest drugstore chain, cosmetics and dermo-cosmetics account for 20 percent of the sales.

Another healthcare market where pharmacies have achieved a significant share of non-pharmaceutical consumer health and beauty categories is Bulgaria. Medicines account for some 60 percent of turnover of the average pharmacy. This is split 44 percent for prescription medicines and 16 percent OTC self-medication. Baby food and nutrition represent about a fifth of sales while cosmetics take 10 percent. There is also a variety of other products which include medical supplies including bandages, hygiene and sanitary products according to Dudley’s OTC Distribution in Europe report.


For further information about OTC Distribution in Europe 2014 edition contact James Dudley Management +44(0) 1562 747705 e-mailinformation@james-dudley.co.uk or visit www.james-dudley.co.uk

Note for Editors

‘OTC Distribution in Europe - the 2014 edition – Meeting the New Challenges covers 22 countries in Europe and is written by the acknowledged industry expert James Dudley and published in Spring 2014. The report covers: Austria, Belgium, Bulgaria, Czech Republic, Finland, Denmark, France, Germany, Hungary, Italy, Netherlands, Norway, Poland, Romania, Russia, Slovakia, Slovenia, Spain, Sweden, Switzerland, Ukraine and the United Kingdom. For Further Information go to http://www.james-dudley.co.uk/

References to OTC medicines, market data, Europe, number of pharmacies, sales turnover, prescription pharmaceuticals, pharmacist, non-prescription, consumer healthcare, health and beauty sales, drugstores, market report and distribution channels.

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