We just had a conversation with Mr.Doan Hong Viet, Chairman of the Board of Digiworld, about pharmaceutical story, the area that Digiworld and many large companies have been targeting.
- Dear Mr.Viet, there are many electronic and mobile phone corporations embarking on pharmaceutical industry. In your opinion, is it due to the saturation of electronics which forces these companies to look for new directions?
Every market has to mature and saturate at some point. Enterprises who want to thrive, must always actively seek for “food sources” from “the blue ocean”, not keep competing forever in “the red ocean”.
In 2016, Digiworld (DGW) had completed its foundation to officially become a Market Expansion Service Provider. Therefore, 2017 is the time for us to expand our business, seeking for opportunity to grow with new potential market. DGW with its strengths of MES (Market Expansion Services) is confident in bringing win-win cooperation to both DGW and its partners who have good products but weak branding.
According to Roland Berger’s latest report in January 2017, MES Service in Asia is witnessing strong growth, particularly in Southeast Asia. Forecasted growth-rate from 2016 to 2021 reaches 8.5%. In particular, healthcare industry is growing thanks to the improvement in quality of life and health awareness, while governments also invests in health care system.
According to Roland Berger, forecasted growth-rate of MES for healthcare in Vietnam from 2016 to 2021 is to reach 11.1%. Besides, FMCG is growing steadily thanks to increases in incomes, population and rising middle class in Asia. In accordance to Roger Berger, growth-rate of MES for FMCG in Vietnam from 2016 to 2021 is forecasted to reach 10.9%.
- Sir, how much is the profit margin of supplement business? Risks in this industry?
Estimated profit margin of this industry is over 60% (as DGW has the ability to involve in many stages in the value chain which compile high profit margin).Revenue contribution at VND 80 billion in 2017 and growth-rate is expected to reach 100%/year, target to reach VND 600 billion in revenue by 2020.
The risks in this industry are as followings: Firstly, the number of users is still limited due to the the majority of Vietnamese’s behavior of curing rather than preventing, although it has improved more than before. Secondly, there are difficulties in communication due to blur regulation on medicines and supplement. Thirdly, high tax rates lead to high costs. Finally, consumers are losing trust in product quality.
- Many risks are mentioned, why Digiworld chooses pharmacy?
Vietnam’s population is huge and moving into aging progress. We are still in the stage of young population but moving fast to aging stage. Many Vietnameses have good income. I am confident to say, every family sitting here is using at least one supplement product which is not curing medicines. By the age of 30, people have signs of aging and will look for supplement products. The market is very potential.
- Who is Digiworld’s rival in the pharmaceutical market?
DKSH is similar in term of business model but target customers are different, therefore we do not step on each other’s foot. It would happen if Digiworld grows fast,but not in the coming time.
Other companies such as The Gioi Di Dong do retailing, and that they could be Digiworld’s customers in pharmaceutical sector. Vietnamese pharmaceutical companies are doing all sorts of things from production to distribution. Likewise, they may become Digiworld’s customers if we prove that we distribute better.
- In the extensive pharmaceutical market, what segment do you focus on?
We focus on supplement products and over-the-counter medicines.
- Many large companies take part in pharmaceutical market. So how does Digiworld enter into this market?
At the moment, large pharmaceutical companies manufacture and distribute products by themselves. Small companies produce and distribute in small areas only, but not strong enough to deploy nationwide. They are Digiworld’s targeted-customer. Digiworld will help them distribute nationwide. Market needs an intermediary in-between, a wide-enough distribution channel and brand marketing capabilities to be popular and distributed nationwide.
Only a few domestic companies are distributing nationwide such as Traphaco, Duoc Hau Giang. Digiworld focuses on OTC market, retail market at pharmacies, not prescription. OTC’s customers are quite similar to FMCG’s customers: meaning that customers only make purchases after getting to know about the products, hearing the marketing message somewhere. Salesperson can explain more for them. Such quite similar to FMCG. And those are what Digiworld has. Products may be different but ways of branding marketing and organizing distribution are similar.
And about the story of The Gioi Di Dong entering pharmaceutical industry, they do retail, not wholesale like Digiworld. Nationwide, there are about 45.000 pharmacies. The biggest retailer only has 40 drug stores. Comparing with cellphone, there are about 10,000 stores, The Gioi Di Dong has about 1.000 stores. Digiworld has a different angle.
There are many manufacturers, they do not know how to promote their brand. That’s exactly what Digiworld is aiming at. Digiworld will not open retailing stores to compete with the others as well as The Gioi Di Dong in the future. The Gioi Di Dong will always be Digiworld’s customer. They are 2 supplementary pieces.
- Whether the way DGW distributing pharmaceutical products be different from the way pharmaceutical companies are doing now?
DGW’s products are not as biopharmaceuticals like pharmaceutical companies (over-the-counter and prescription) but as supplement products and OTC medicines. Apart from pharmacy channel, DGW will also focus on other channels such as convenience stores, health-care supermarkets… and e-commerce.
Thank you for sharing!