New Delhi: Beauty products and premium cosmetics are moving from neighbourhood groceries and supermarkets to chemists.
Once the sellers of prescription drugs and over-the-counter (OTC) medicinal products, chemists—or pharmacies— are increasingly pushing personal care and grooming products.
The new merchants of beauty are driving sales of premium creams, deodorants, soaps, face-wash and shampoos that consumers are happy to browse through and pick up in an uncluttered environment. And pharmacies stand to profit by expanding the ticket size at their counters.
Although consumer product companies such as Procter and Gamble, Hindustan Unilever Ltd, Nestle SA, Dabur India Ltd and Emami Ltd have long used pharmacies to sell OTC digestive tablets, diapers and feminine hygiene products, the new trend with cosmetic sales is big, experts and manufacturers says.
In some categories, 8-10% of sales come through pharmacies, according to Hemant Mehta, senior vice-president at research agency IMRB International.
Satyaki Ghosh, director, consumer products at L’Oreal India called pharmacies a “high growth” channel for premium brands—the French cosmetics maker pushes its L’Oreal and Garnier brands through chemists. “Consumers rely on some sense of information about a product while making purchase decisions for skin care products. They tend to believe the pharmacy more than a regular channel,” he said. Pharmacies account for 20% of L’Oreal sales in the top eight cities in India.
“Chemists have moved away from being just sellers of medicines. They have a more hybrid model now,” said Sunil Kataria, chief operating officer, sales, marketing and SAARC, at Mumbai-based Godrej Consumer Products Ltd that uses pharmacies to retail brands such as Cinthol soap, Hit mosquito repellent and Godrej hair dye. According to IMRB, pharmacies account for 17% of all after-shave lotions, 10% of deodorants and 8% of skin care lotions sold in the country.
“The consumer buys in a neat and clean environment, so the setting is right for premium products. Some personal care brands also keep their salespeople at a chemist or set up shop-in-shops,” said Kannan Sitaram, chief executive officer, consumer goods at India Equity Partners.
Brand promotions also fetch additional revenue for retailers in the form of promotion fees.
L’Oreal has seen a jump in the sale of men’s grooming products at pharmacies. “Men are more likely to walking into a pharmacy store to buy medicines than enter grocery stores. So products such as Garnier’s fairness cream and deodorants for men are flying off the shelves at pharmacy stores,” Ghosh said.
For pharmacies—there are 750,000 of them in India, mostly in the unorganized sector— this is an opportunistic arrangement. An average pharmacy has a waiting time of 3 to 5 minutes, between a walk-in and generation of bill. While customers wait to purchase medicines, sales staff push “wellness products”, said Atul Ahuja, vice-president, retail, at Apollo Pharmacy that manages 1,600 pharmacy outlets across the country.
Five years back, 18-20% of Apollo’s revenue came from non-medicine products. Today, they account for 30-35% of products being sold in terms of value. New Delhi based FMCG company, Dabur India Ltd, the makers of Vatika hair oil and shampoo and Babool toothpaste, has put in place a sales team to specifically cater to pharmacy chains. “Being available at chemists does add a lot of credibility to a product, and at Dabur we place a lot of importance to chemists,” said George Angelo, executive director of sales at Dabur India Ltd.
Kolkata based Emami Ltd, which makes OTC products such as Zandu balm and men’s personal care brand Fair and Handsome, expanded its pharmacy network a few years ago. “Chemists in large metros started stocking a large number of FMCG (fast moving consumer goods) products, so we realized the importance of selling through them,” said N. Krishna Mohan, chief executive, sales, supply chain and human capital, at Emami.
Today the company reaches out directly to 100,000 pharmacies.
Traditionally, Indians shop for soaps, toothpaste, detergents and other personal care products at their neighbourhood kirana (family-run grocery) stores—there are thought to be 9.8 million of them. However, personal care companies say that over the last few years, customers have traded up, prompting companies to make greater use of pharmacies to sell their products. For chemists, margins on premium consumer products are high.
However, according to Rahul Chadha, chief executive of Religare Wellness Ltd, the pharmacy chain from the Fortis Healthcare group, “for chemists, yield per square foot on prescription drugs is better”. Religare operates 110 pharmacies across India.
He said margins on FMCG products are not very high, compared to those on generic drugs, “but if a brand (of FMCG) is aggressive then the product can give a fillip to the bottom line at the store level”.
However, he agreed that stocking such products adds to the average ticket size.
Religare also runs promotional offers from oral-care or personal care brands, earning a promotional fee. Ankur Bisen, vice-president, retail, at consulting firm Technopak Advisors Ltd, said that pharmacy chains have been giving out shelf-space to FMCG products to ensure store level profitability. Such chains have higher operating costs than local family-owned chemists due to longer hours, higher rentals and staff numbers.
For now, the reach of pharmacy chains is limited to large cities. And small town chemists, still focused on selling prescription drugs, are yet to stock non-medicine products in large numbers, said Krishna Mohan of Emami Ltd.
Cosmetics companies may take a bit longer to reach them.