Market share of drug store

Japanese drug store market stop growing!?

The market size of drug store in Japan is about 6.5 trillion yen(about 65 billion dollars) according to the report of JAPAN ASSOCIATION OF CHAIN DRUG STORES in 2018. This market size was increasing rapidly every year because of low price and extending their hours of operation.

However, this market is slightly slowing down in recent years. It was growing about 5% every year from 2005 to 2010. It was also growing aboout 2% every year from 2010 to 2015. The number of drug stores increases because drug store companies actively open new stores. On the other hand, .the number of drug store companies decreases because they are proctive in M&A.

The drug store market was growing from 1990s by selling toiletry and food. Drug stores competed with grocery stores and convenience stores, but thry could increase their sales and profit. They increased their sales by low peice food and toiletry, and increased their profit by high price drug.

That turned around after Japanese government revised Pharmaceutical Law in 2009. Grocery stores and convenience stores became to be able to sell drugs by this revising. In addition, Japanese government revised Pharmaceutical Law again in 2013. Internet shops became to be able to sell some drugs by this revising. Drug stores developed low-priced private brand drugs to surpass their competitors in the drig field. They can keep their high profit ratio and open new stores by that.

Drug stores not only compete with grocery stores and convenience stores but also cooperate with them. The first cooperation between drug sotre and convenience store is cooperation Matsumotokiyoshi Co. and Lawson in August 2009. After that, Cocokara fine Inc. which belong to WIN group cooperated with Circle K Sunkus Co. (it is merged with FamilyMart in 2016) in December 2009. Tsuruha Holdings Inc. cooperated with POPLAR Co. in 2010, and do with Lawson in 2015.

There are three major drug store companies in Japan, Matsumotokiyoshi group, AEON's HapYcom group and WIN group. In the drug store sales ranking 2017, Welcia Holdings which belongs AEON group has the largest sales. Tsuruha Holdings has the second largest sales, Matsumotokiyoshi Holdings has the third largest sales. Matsumotokiyoshi Holdings had the largest sales from 1994, but Welcia and Tsuruha overcame it in 2017. There are other drug store companies, Sundrug, COSMOS Pharmaceutical Co, Cocokara fine, Sugi Holdings, Cawachi Ltd, Create SD, Ain Holdings and more.

Welcia Holdings is increasing its sales by M&A, it bought HAC Drug, Takiya Drug, Shimizu Drug for three years from 2014. Its sales was only 200 billion yen in 2014, but its sales increased rapidly and became about 530 billion yen in 2015. Its sales overcame the sales of Matsumotokiyoshi at last in 2017. Welcia has about 1500 stores in Japan. Most of them are suburban-type stores in constrast with most of Matsumotokiyoshi's stores are urban-type.

Matsumotokiyoshi is a synonym for drug store in Japan because its sales was largest among Japanese drug stores for 22 years in a row from 1995. Its sales in 2016 decreases slightly from the previous year by closing 90 stores, redecorating 50 stores and opening 100 stores. It is said that it stopped increasing its sales to improve financial condition. In addition, it is well known as popular drug store for foreign travelers. Its 380 stores became duty-free shops for foreing travelers. It also opened "Matsukiyo LAB" and "Beauty U" for Japanese women. Beauty specialist helo customers to make up and wear nail polish.

Tsuruha Holdings has not only Tsuruha drug brand but also Kusurino Fukutaro, Drug store Wellness, Drug store Wants, Lady drug store brand. It is heading south from Hokkaido with increasing its sales through M&A. In recent years, it bought Kyorindo in 2017, B&D Holdings in 2018. Its sales will overcome Welcia and be largest in Japanese drug stores if it continues to buy other drug stores.

Internet shopping is also a threat for drug stores, but buying drugs in internet is not expanding rapidly in Japan. Because Internet shops can not sell all drugs by Pharmaceutical Law. In addition, people can buy a drug soon in a drug store when they are sick, but they get a drug tomorrow in the internet shops. Deriverying on the same day as an order placing might be a key for buying a drug in the internet shop or not.

Welcia Holdings(TYO:3141), Tsuruha Holdings(TYO:3391) and Matsumotokiyoshi Holdings(TYO:3088) are listed on the Tokyo Stock Exchange. Foreign investors can invest these companies through many ETFs, iShares MSCI Japan ETF(EWJ), Wisdomtree Japan Hedged ETF(DXJ) and more. Many Japanese companies increase their sales and profit with weak yen. If investors want to hedge an impact of fluctuations in foregn exchange rates, they should invest currency hedged ETFs, Deutsche X-trackers MSCI Japan Currency-Hedged Equity Fund(DBJP) and iShares Currency Hedged MSCI Japan ETF(HEWJ).